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**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

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**Form 10-Q**

 

**x****      QUARTERLY REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For the quarterly period ended September 30, 2010**

 

**OR**

 

**o****         TRANSITION REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934**

 

**For the transition period from         to**

 

**Commission File Number 001-12593**

 

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**Atlantic Tele-Network, Inc.**

(Exact name of registrant as specified in its charter)

 

| **Delaware**                    | ** ** | **47-0728886**         |
|---------------------------------|------------|------------------------|
| (State or other jurisdiction of |       | (I.R.S. Employer       |
| incorporation or organization)  |       | Identification Number) |

 

**600 Cummings Center**

**Beverly, MA 01915**

(Address of principle executive offices, including zip code)

 

**(978) 619-1300**

(Registrant’s telephone number, including area code)

 

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Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days.Yes xNo o

 

Indicateby check mark whether the registrant has submitted electronically and posted onits corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 ofthis chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files). Yes o No o

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer, or a smaller reporting company. Seedefinitions of “large accelerated filer,” “accelerated filer,” and “smallerreporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

| Large  accelerated filer o                     |   | Accelerated  filer x         |
|------------------------------------------------|--------|-----------------------------------|
|                                           |   |                              |
| Non-accelerated  filer o                       |   | Smaller  reporting company o |
| (Do  not check if a smaller reporting company) |   |                              |

 

Indicateby check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act):Yes oNo x

 

Asof November 9, 2010, the registrant had outstanding 15,379,137 shares ofits common stock ($.01 par value).

 

 

 

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**ATLANTIC TELE-NETWORK, INC.**

 

FORM 10-Q

Quarter Ended September 30, 2010

 
| CAUTIONARY STATEMENT REGARDING FORWARD LOOKING  STATEMENTS | 3                                                                                                           |
|------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------|
|                                                       |                                                                                                        |   |
| PART I—FINANCIAL INFORMATION                     | 4                                                                                                           |
|                                                       |                                                                                                        |   |
| Item 1                                                | Unaudited  Condensed Consolidated Financial Statements                                                      | 4 |
|                                                       |                                                                                                        |   |
|                                                       | Condensed Consolidated Balance Sheets at  December 31, 2009 and September 30, 2010                | 4 |
|                                                       |                                                                                                        |   |
|                                                       | Condensed Consolidated Income Statements for the Three  and Nine Months Ended September 30, 2009 and 2010   | 5 |
|                                                       |                                                                                                        |   |
|                                                       | Condensed Consolidated Statements of Cash Flows for the  Nine Months Ended September 30, 2009 and 2010 | 6 |
|                                                       |                                                                                                        |   |
|                                                       | Notes to Unaudited Condensed Consolidated Financial  Statements                                             | 7-19 |
|                                                       |                                                                                                        |   |
| Item 2                                                     | Management’s Discussion and  Analysis of Financial Condition and Results of Operations                 | 20-33 |
|                                                       |                                                                                                        |   |
| Item 3                                                     | Quantitative  and Qualitative Disclosures About Market Risk                                                 | 33 |
|                                                       |                                                                                                        |   |
| Item 4                                                     | Controls and  Procedures                                                                                    | 33 |
|                                                       |                                                                                                        |   |
| PART II—OTHER  INFORMATION                       | 34                                                                                                          |
|                                                       |                                                                                                        |   |
| Item 1                                                     | Legal Proceedings                                                                                           | 34 |
|                                                       |                                                                                                        |   |
| Item1A                                                     | Risk Factors                                                                                                | 34 |
|                                                       |                                                                                                        |   |
| Item 2                                                     | Unregistered  Sales of Equity Securities and Use of Proceeds                                                | 34 |
|                                                       |                                                                                                        |   |
| Item 6                                                     | Exhibits                                                                                                    | 35 |
|                                                       |                                                                                                        |   |
| SIGNATURES                                                 |                                                                                                        |
|                                                       |                                                                                                        |   |
| CERTIFICATIONS                                             |                                                                                                        |

 

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**Cautionary Statement RegardingForward-Looking Statements**

 

ThisQuarterly Report on Form 10-Q (or the “Report”) contains forward-lookingstatements relating to, among other matters, our future financial performanceand results of operations; the competitive environment in our key markets,demand for our services and industry trends; the outcome of litigation andregulatory matters; our continued access to the credit and capital markets; thepace of our network expansion and improvement, including our level of estimatedfuture capital expenditures and our realization of the benefits of theseinvestments; and management’s plans and strategy for the future.  These forward-looking statements are based onestimates, projections, beliefs, and assumptions and are not guarantees offuture events or results.  Actual futureevents and results could differ materially from the events and resultsindicated in these statements as a result of many factors, including, amongothers, (1) our ability to operate a large scale retail wireless businessin the United States and integrate these operations into our existingoperations; (2)  the general performance of our U.S. operations, includingoperating margins, and the future retention and turnover of the our subscriberbase; (3) our ability to maintain favorable roaming arrangements;(4) increased competition; (5) economic, political and other risksfacing our foreign operations; (6) the loss of certain FCC and otherlicenses and other regulatory changes affecting our businesses; (7) rapidand significant technological changes in the telecommunications industry;(8) any loss of any key members of management; (9) our reliance on alimited number of key suppliers and vendors for timely supply of equipment andservices relating to our network infrastructure and retail wireless business;(10) the adequacy and expansion capabilities of our network capacity andcustomer service system to support our customer growth; (11) the occurrence ofsevere weather and natural catastrophes; (12) the current difficult globaleconomic environment, along with difficult and volatile conditions in thecapital and credit markets; and (13) our ability to realize the value that webelieve exists in businesses that we may or have acquired. These and otheradditional factors that may cause actual future events and results to differmaterially from the events and results indicated in the forward-lookingstatements above are set forth more fully under Item 1A “Risk Factors” of thisReport as well as the Company’s Annual Report on Form 10-K for the yearended December 31, 2009, filed with the SEC on March 16, 2010and  the Company’s Quarterly Report onForm 10-Q for the quarterly period ended March 31, 2010, filed withthe SEC on May 10, 2010. The Company undertakes no obligation to updatethese forward-looking statements to reflect actual results, changes inassumptions or changes in other factors that may affect such forward-lookingstatements.

 

In this Report, the words “theCompany”, “we,” “our,” “ours,” “us” and “ATN” refer to AtlanticTele-Network, Inc. and its subsidiaries, unless the context indicatesotherwise. This Report contains trademarks, service marks and trade names suchas “*Alltel*”, “*CellularOne*”,“*Cellink*”, “*Islandcom*”,“*Choice*”, “*Sovernet*”and “*ION*” that are the property of, orlicensed by, ATN, and its subsidiaries.

 

Reference to dollars ($)refer to U.S. dollars unless otherwise specifically indicated.

 

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**PART I—FINANCIAL INFORMATION**

**Item 1.  Unaudited Condensed Consolidated FinancialStatements**

 

**ATLANTIC TELE-NETWORK, INC. AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED BALANCE SHEETS**

**(Unaudited)**

**(Dollars inthousands, except per share amounts)**

 
| ** **                                                                                                                                                                                     | ** ** | **December 31,  2009** | ** ** | **September 30,  2010** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|------------------------------|------------|
| **ASSETS**                                                                                                                                                                                     |       |                        |       |                         |       |
| Current Assets:                                                                                                                                                                                |       |                        |       |                         |       |
| Cash and cash equivalents                                                                                                                                                                      |       | $                           | 90,247     |                         | $          | 61,810 |   |
| Restricted cash                                                                                                                                                                                |       | 5,248                       |       | 466                          |       |
| Accounts receivable, net of allowances of $4.2  million and $14.2 million, respectively                                                                                                        |       | 26,831                      |       | 62,585                       |       |
| Materials and supplies                                                                                                                                                                         |       | 5,917                       |       | 19,262                       |       |
| Deferred income taxes                                                                                                                                                                          |       | 3,046                       |       | 3,331                        |       |
| Prepayments and other current assets                                                                                                                                                           |       | 5,226                       |       | 12,842                       |       |
| Total current assets                                                                                                                                                                           |       | 136,515                     |       | 160,296                      |       |
| Property, plant and equipment, net                                                                                                                                                             |       | 217,015                     |       | 441,182                      |       |
| Telecommunications licenses                                                                                                                                                                    |       | 34,830                      |       | 83,089                       |       |
| Goodwill                                                                                                                                                                                       |       | 40,361                      |       | 40,361                       |       |
| Trade name license, net                                                                                                                                                                        |       | —                      |       | 13,611                       |       |
| Customer relationships, net                                                                                                                                                                    |       | 1,848                       |       | 51,807                       |       |
| Deferred income taxes                                                                                                                                                                          |       | 9,085                       |       | 6,004                        |       |
| Other assets                                                                                                                                                                                   |       | 6,900                       |       | 16,864                       |       |
| Total assets                                                                                                                                                                                   |       | $                           | 446,554    |                         | $          | 813,214 |   |
| **LIABILITIES AND  STOCKHOLDERS’ EQUITY**                                                                                                                                                 |       |                        |       |                         |       |
| Current Liabilities:                                                                                                                                                                           |       |                        |       |                         |       |
| Current portion of long-term debt                                                                                                                                                              |       | $                           | 3,694      |                         | $          | 12,194 |   |
| Accounts payable and accrued liabilities                                                                                                                                                       |       | 29,717                      |       | 42,231                       |       |
| Dividends payable                                                                                                                                                                              |       | 3,055                       |       | 3,393                        |       |
| Accrued taxes                                                                                                                                                                                  |       | 9,900                       |       | 4,895                        |       |
| Advance payments and deposits                                                                                                                                                                  |       | 3,756                       |       | 17,180                       |       |
| Other current liabilities                                                                                                                                                                      |       | 6,765                       |       | 71,035                       |       |
| Total current liabilities                                                                                                                                                                      |       | 56,887                      |       | 150,928                      |       |
| Deferred income taxes                                                                                                                                                                          |       | 32,171                      |       | 49,555                       |       |
| Other liabilities                                                                                                                                                                              |       | 5,512                       |       | 33,963                       |       |
| Long-term debt, excluding current portion                                                                                                                                                      |       | 69,551                      |       | 250,807                      |       |
| Total liabilities                                                                                                                                                                              |       | 164,121                     |       | 485,253                      |       |
| Commitments and contingencies (Note 11)                                                                                                                                                        |       |                        |       |                         |       |
| Atlantic Tele-Network, Inc.’s Stockholders’  Equity:                                                                                                                            |       |                        |       |                         |       |
| Preferred stock, $0.01 par value per share;  10,000,000 shares authorized, none issued and outstanding                                                                                         |       | —                      |       | —                       |       |
| Common stock, $0.01 par value per share;  50,000,000 shares authorized; 15,732,382 and 15,876,984 shares issued,  respectively, and 15,233,745 and 15,379,137 shares outstanding, respectively |       | 158                         |       | 159                          |       |
| Treasury stock, at cost; 498,637 and 497,847  shares, respectively                                                                                                                             |       | (4,687                      | )          | (4,680                       | )          |
| Additional paid-in capital                                                                                                                                                                     |       | 108,720                     |       | 111,799                      |       |
| Retained earnings                                                                                                                                                                              |       | 156,827                     |       | 182,495                      |       |
| Accumulated other comprehensive loss                                                                                                                                                           |       | (5,272                      | )          | (8,335                       | )          |
| Total Atlantic Tele-Network, Inc.’s  stockholders’ equity                                                                                                                       |       | 255,746                     |       | 281,438                      |       |
| Non-controlling interests                                                                                                                                                                      |       | 26,687                      |       | 46,523                       |       |
| Total equity                                                                                                                                                                                   |       | 282,433                     |       | 327,961                      |       |
| Total liabilities and equity                                                                                                                                                                   |       | $                           | 446,554    |                         | $          | 813,214 |   |

 

The accompanying condensed notes are an integral part of thesecondensed consolidated financial statements.

 

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**ATLANTICTELE-NETWORK, INC. AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED INCOME STATEMENTS**

**FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER30, 2009 and 2010**

**(Unaudited)**

**(Dollars inthousands, except per share amounts)**

 
| ** **                                                                                                                                                                                                                                                                                       | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                                                                                                                                                                                                                                                       | ** ** | **2009**                                             | ** ** | **2010**                                            | ** ** | **2009** | ** ** | **2010** | ** ** |
| **REVENUE:**                                                                                                                                                                                                                                                                                     | ** ** | ** **                                           | ** ** | ** **                                          | ** ** | ** ** | ** ** | ** ** | ** ** |
| U.S. Wireless:                                                                                                                                                                                                                                                                                   |       |                                                 |       |                                                |       |   |   |   |   |
| Retail                                                                                                                                                                                                                                                                                           |       | $                                                    | —     |                                                | $          | 108,828 |   | $ | — |   | $ | 190,331 |   |
| Wholesale                                                                                                                                                                                                                                                                                        |       | 31,837                                               |       | 49,952                                              |       | 79,276 |   | 112,437 |   |
| International Wireless                                                                                                                                                                                                                                                                           |       | 11,684                                               |       | 14,220                                              |       | 33,725 |   | 37,712 |   |
| Wireline                                                                                                                                                                                                                                                                                         |       | 21,969                                               |       | 20,829                                              |       | 66,634 |   | 64,580 |   |
| Equipment and Other                                                                                                                                                                                                                                                                              |       | 602                                                  |       | 11,131                                              |       | 2,982 |   | 19,420 |   |
| Total revenue                                                                                                                                                                                                                                                                                    |       | 66,092                                               |       | 204,960                                             |       | 182,617 |   | 424,480 |   |
| **OPERATING EXPENSES**(*excluding depreciation and amortization unless otherwise indicated*):                                                                                                                                                                                                    | ** ** | ** **                                           | ** ** | ** **                                          | ** ** | ** ** | ** ** | ** ** | ** ** |
| Termination and access fees                                                                                                                                                                                                                                                                      |       | 11,830                                               |       | 53,076                                              |       | 34,702 |   | 109,186 |   |
| Engineering and operations                                                                                                                                                                                                                                                                       |       | 6,519                                                |       | 21,747                                              |       | 21,010 |   | 46,288 |   |
| Sales and marketing                                                                                                                                                                                                                                                                              |       | 3,454                                                |       | 50,411                                              |       | 9,769 |   | 86,310 |   |
| Equipment expense                                                                                                                                                                                                                                                                                |       | 615                                                  |       | 12,700                                              |       | 1,697 |   | 22,321 |   |
| General and administrative                                                                                                                                                                                                                                                                       |       | 8,690                                                |       | 29,179                                              |       | 26,166 |   | 62,887 |   |
| Acquisition-related charges                                                                                                                                                                                                                                                                      |       | 2,072                                                |       | 47                                                  |       | 2,479 |   | 15,881 |   |
| Depreciation and amortization                                                                                                                                                                                                                                                                    |       | 9,763                                                |       | 23,974                                              |       | 28,756 |   | 52,585 |   |
| Total operating expenses                                                                                                                                                                                                                                                                         |       | 42,943                                               |       | 191,134                                             |       | 124,579 |   | 395,458 |   |
| Income from operations                                                                                                                                                                                                                                                                           |       | 23,149                                               |       | 13,826                                              |       | 58,038 |   | 29,022 |   |
| **OTHER INCOME (EXPENSE):**                                                                                                                                                                                                                                                                      | ** ** | ** **                                           | ** ** | ** **                                          | ** ** | ** ** | ** ** | ** ** | ** ** |
| Interest expense                                                                                                                                                                                                                                                                                 |       | (1,228                                               | )          | (3,202                                              | )          | (3,582 | ) | (6,857 | ) |
| Interest income                                                                                                                                                                                                                                                                                  |       | 354                                                  |       | 90                                                  |       | 1,063 |   | 329 |   |
| Equity in earnings of unconsolidated affiliates                                                                                                                                                                                                                                                  |       | —                                               |       | 166                                                 |       | — |   | 456 |   |
| Gain on bargain purchase, net of deferred taxes of  $18,016                                                                                                                                                                                                                                      |       | —                                               |       | —                                              |       | — |   | 27,024 |   |
| Other income, net                                                                                                                                                                                                                                                                                |       | 13                                                   |       | 204                                                 |       | 48 |   | 435 |   |
| Other income (expense), net                                                                                                                                                                                                                                                                      |       | (861                                                 | )          | (2,742                                              | )          | (2,471 | ) | 21,387 |   |
| **INCOME BEFORE INCOME TAXES**                                                                                                                                                                                                                                                                   |       | 22,288                                               |       | 11,084                                              |       | 55,567 |   | 50,409 |   |
| Income tax expense                                                                                                                                                                                                                                                                               |       | 9,919                                                |       | 5,022                                               |       | 24,217 |   | 15,447 |   |
| **NET INCOME**                                                                                                                                                                                                                                                                                   |       | 12,369                                               |       | 6,062                                               |       | 31,350 |   | 34,962 |   |
| Less: Net income attributable to non-controlling  interests, net of tax of $0.7 million and $0.5 million for the three months  ended September 30, 2009 and 2010, respectively, and $2.1 million and  $1.8 million for the nine months ended September 30, 2009 and 2010, respectively |       | (433                                                 | )          | 303                                                 |       | (976 | ) | 212 |   |
| **NET INCOME ATTRIBUTABLE TO  ATLANTIC TELE-NETWORK, INC. STOCKHOLDERS**                                                                                                                                                                                                                    |       | $                                                    | 11,936     |                                                | $          | 6,365 |   | $ | 30,374 |   | $ | 35,174 |   |
| **NET INCOME PER WEIGHTED AVERAGE  SHARE ATTRIBUTABLE TO ATLANTIC TELE-NETWORK, INC. STOCKHOLDERS**                                                                                                                                                                                         | ** ** | ** **                                           | ** ** | ** **                                          | ** ** | ** ** | ** ** | ** ** | ** ** |
| Basic                                                                                                                                                                                                                                                                                            |       | $                                                    | 0.78       |                                                | $          | 0.41 |   | $ | 1.99 |   | $ | 2.30 |   |
| Diluted                                                                                                                                                                                                                                                                                          |       | $                                                    | 0.78       |                                                | $          | 0.41 |   | $ | 1.98 |   | $ | 2.27 |   |
| **WEIGHTED AVERAGE COMMON SHARES  OUTSTANDING:**                                                                                                                                                                                                                                                 | ** ** | ** **                                           | ** ** | ** **                                          | ** ** | ** ** | ** ** | ** ** | ** ** |
| Basic                                                                                                                                                                                                                                                                                            |       | 15,237                                               |       | 15,349                                              |       | 15,233 |   | 15,303 |   |
| Diluted                                                                                                                                                                                                                                                                                          |       | 15,398                                               |       | 15,502                                              |       | 15,304 |   | 15,476 |   |
| **DIVIDENDS PER SHARE APPLICABLE  TO COMMON STOCK**                                                                                                                                                                                                                                              |       | $                                                    | 0.20       |                                                | $          | 0.22 |   | $ | 0.56 |   | $ | 0.62 |   |

 

The accompanying condensed notes are an integral part of thesecondensed consolidated financial statements.

 

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**ATLANTICTELE-NETWORK, INC. AND SUBSIDIARIES**

**CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS**

**FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND2010**

**(Unaudited)**

**(Dollars inthousands)**

 
| ** **                                                                                                                         | ** ** | **Nine Months Ended  September 30,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                                                                                         | ** ** | **2009**                                            | ** ** | **2010** | ** ** |
| **CASH FLOWS FROM OPERATING  ACTIVITIES:**                                                                                         | ** ** | ** **                                          | ** ** | ** ** | ** ** |
| Net income                                                                                                                         |       | $                                                   | 31,350     |   | $ | 34,962 |   |
| Adjustments to reconcile net income to net cash  flows provided by operating activities:                                           |       |                                                |       |   |   |
| Bargain purchase gain, net of tax                                                                                                  |       | —                                              |       | (27,024 | ) |
| Depreciation and amortization                                                                                                      |       | 28,756                                              |       | 52,585 |   |
| Provision for doubtful accounts                                                                                                    |       | 1,104                                               |       | 10,993 |   |
| Amortization of debt discount and debt issuance  costs                                                                             |       | 388                                                 |       | 1,014 |   |
| Stock-based compensation                                                                                                           |       | 1,019                                               |       | 1,536 |   |
| Deferred income taxes                                                                                                              |       | 596                                                 |       | 5,302 |   |
| Changes in operating assets and liabilities,  excluding the effects of acquisitions:                                               |       |                                                |       |   |   |
| Accounts receivable                                                                                                                |       | (6,251                                              | )          | (12,002 | ) |
| Materials and supplies, prepayments, and other  current assets                                                                     |       | 1,736                                               |       | (17,550 | ) |
| Prepaid income taxes                                                                                                               |       | 10,708                                              |       | — |   |
| Accounts payable and accrued liabilities, advance  payments and deposits and other current liabilities                             |       | 800                                                 |       | 69,194 |   |
| Accrued taxes                                                                                                                      |       | 1,267                                               |       | (9,971 | ) |
| Other                                                                                                                              |       | (672                                                | )          | (8,693 | ) |
| Net cash provided by operating activities                                                                                          |       | 70,801                                              |       | 100,346 |   |
| **CASH FLOWS FROM INVESTING  ACTIVITIES:**                                                                                         |       |                                                |       |   |   |
| Acquisitions of businesses, net of cash acquired  of $0 and $53 in the nine months ended September 30, 2009 and 2010, respectively |       | (24                                                 | )          | (225,498 | ) |
| Capital expenditures                                                                                                               |       | (40,273                                             | )          | (91,632 | ) |
| Acquisitions of assets                                                                                                             |       | (25                                                 | )          | (57 | ) |
| Maturity of short-term marketable securities                                                                                       |       | 2,956                                               |       | — |   |
| Decrease (increase) in restricted cash                                                                                             |       | (3,578                                              | )          | 4,782 |   |
| Net cash used in investing activities                                                                                              |       | (40,944                                             | )          | (312,405 | ) |
| **CASH FLOWS FROM FINANCING  ACTIVITIES:**                                                                                         | ** ** | ** **                                          | ** ** | ** ** | ** ** |
| Proceeds from borrowings under term loan                                                                                           |       | —                                              |       | 200,000 |   |
| Proceeds from borrowings under revolver loan                                                                                       |       | —                                              |       | 40,000 |   |
| Dividends paid on common stock                                                                                                     |       | (8,224                                              | )          | (9,186 | ) |
| Distributions to non-controlling interests                                                                                         |       | (5,543                                              | )          | (1,239 | ) |
| Payments of debt issuance costs                                                                                                    |       | —                                              |       | (4,322 | ) |
| Repayments of long-term debt                                                                                                       |       | (564                                                | )          | (46,520 | ) |
| Investments made by non-controlling interests                                                                                      |       | 200                                                 |       | 3,338 |   |
| Proceeds from stock option exercises                                                                                               |       | 74                                                  |       | 1,551 |   |
| Purchase of common stock                                                                                                           |       | (23                                                 | )          | — |   |
| Net cash provided by (used in) financing  activities                                                                               |       | (14,080                                             | )          | 183,622 |   |
| **NET CHANGE IN CASH AND CASH  EQUIVALENTS**                                                                                       |       | 15,777                                              |       | (28,437 | ) |
| **CASH AND CASH EQUIVALENTS,  beginning of the period**                                                                            |       | 79,665                                              |       | 90,247 |   |
| **CASH AND CASH EQUIVALENTS, end  of the period**                                                                                  |       | $                                                   | 95,442     |   | $ | 61,810 |   |

 

The accompanying condensed notes are an integral part of thesecondensed consolidated financial statements.

 

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**ATLANTICTELE-NETWORK, INC. AND SUBSIDIARIES**

**NOTES TOUNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

 

**1. ORGANIZATION AND BUSINESS OPERATIONS**

 

AtlanticTele-Network, Inc. (“ATN” or “Company”) provides the following telecommunicationsservices, through its operating subsidiaries, in North America, Bermuda and theCaribbean:

 

·                  ***Wireless.***  In the UnitedStates, the Company offers wireless voice and data services to retail customersunder the “Alltel” name in rural markets located principally in the Southeastand Midwest. Additionally, the Company offers wholesale wireless voice and dataroaming services to national, regional and local wireless carriers in ruralmarkets located principally in the Southwest and Midwest United States.  The Company also offers wireless voice anddata services to retail customers in Guyana under the “Cellink” name, inBermuda under the “CellularOne” name, in Turks and Caicos under the “Islandcom”name, in the U.S. Virgin Islands under the “Choice” name and in other smallermarkets in the U.S. and the Caribbean.

 

·                  ***Wireline.***  The Company’swireline services include operations in Guyana under the “GT&T” name and inthe United States under the “Sovernet” and “ION” names.  The Company is the exclusive licensedprovider of domestic wireline local and international long distance telephoneservices in Guyana. The Company offers facilities-based integrated voice anddata communications services to residential and business customers in NewEngland, primarily in Vermont, and wholesale transport services in New YorkState.

 

ATN was incorporated in Delaware in 1987 and since that time, hasengaged in strategic acquisitions and investments to grow the Company’soperations.  From 1998 through 2005, asignificant majority of the Company’s revenue was derived from its wireless andwireline operations in Guyana, in which the Company has owned an 80% interestsince 1991.  The Company also derived aportion of its revenue from a non-controlling investment made in 1998 in avoice and data services provider in Bermuda. The Company has been a provider offixed and portable wireless broadband data and dial-up internet servicesthrough its U.S. Virgin Islands subsidiary, acquired in 1999, which provided asmall portion of the Company’s annual revenues. In the past five years, theCompany has added substantially to the diversity of its business and reducedits historical dependence on its Guyana operations for its financialresults.  The Company entered the U.S.telecommunications market through the 2005 acquisition of an operator of awholesale wireless network in rural portions of the Southwest and Midwest andthe Company continued its U.S. expansion with the 2006 acquisition of awireline voice, broadband data and dial-up service provider in New England.  In 2008, the Company increased its investmentin its Bermuda business to a controlling 58% interest and entered into new U.S.and Caribbean markets with investments in two early stage businesses providingwholesale transport services in New York State and wireless voice and dataservices in Turks and Caicos.  Inaddition to the diversification of its business through acquisition, theCompany has further accentuated its focus on its U.S. operations with increasedcapital investment in and growth of its wholesale wireless business, which wasthe single largest contributor to its revenue and operating income in 2009.

 

In the second quarter of 2010, the Company completed its acquisition ofa U.S. retail wireless business, which provides wireless voice and dataservices in rural markets of the United States under the “Alltel” brandname.  Also during the quarter, theCompany completed an investment in a wireless telecommunications provider in Aruba,in which it holds a controlling interest. With the completion of the Alltelasset acquisition, the Company continued its trend towards growth inU.S.-sourced revenue, with the U.S. wireless portion of its business nowconstituting a significant majority of the Company’s consolidated revenue.  The Company continues to actively evaluateadditional investment and acquisition opportunities in the United States andthe Caribbean that meet its return-on-investment and other acquisition criteria.

 

TheCompany provides management, technical, financial, regulatory, and marketingservices to its subsidiaries and typically receives a management fee equal toapproximately 3% to 5% of their respective revenue, along with other fees andtransfer payments, where appropriate. Management fees from consolidatedsubsidiaries are eliminated in consolidation.

 

**2.  BASIS OFPRESENTATION**

 

Theaccompanying condensed consolidated financial statements have been prepared bythe Company pursuant to the rules and regulations of the Securities andExchange Commission (“SEC”). The financial information included herein isunaudited; however, the Company believes such information and the disclosuresherein are adequate to make the information presented not misleading andreflect all adjustments (consisting only of normal recurring adjustments) thatare necessary for a fair statement of the Company’s financial position andresults of operations for such periods. The year-end condensed balance sheetdata was derived from audited financial statements, but does not include alldisclosures required by accounting principles generally accepted in the UnitedStates of America.  Results of interim periods may not be indicativeof results for the full year.  These condensed consolidated financial statementsand related notes should be read in conjunction with the Company’s 2009 AnnualReport on Form 10-K.

 

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***Consolidation***

 

Theconsolidated financial statements include the accounts of the Company, itsmajority-owned subsidiaries and certain entities, which are consolidated inaccordance with the provisions of Financial Accounting Standards Board (“FASB”)authoritative guidance on the consolidation of variable interest entities sinceit is determined that the Company is the primary beneficiary of these entities.Revenue from these entities constitutes less than 1% of total Company revenue.

 

***Recent Accounting Pronouncements***

 

In January 2010, theFASB issued updated guidance to amend the disclosure requirements related torecurring and nonrecurring fair value measurements. This update requires newdisclosures on significant transfers of assets and liabilities in and out ofLevel 1 and Level 2 of the fair value hierarchy (including the reasons forthese transfers) and also requires a reconciliation of recurring Level 3measurements about purchases, sales, issuances and settlements on a grossbasis. In addition to these new disclosure requirements, this update clarifiescertain existing disclosure requirements. For example, this update clarifiesthat reporting entities are required to provide fair value measurementdisclosures for each class of assets and liabilities rather than each majorcategory of assets and liabilities. This update also clarifies the requirementfor entities to disclose information about both the valuation techniques andinputs used in estimating Level 2 and Level 3 fair value measurements. This updateis effective for companies with interim and annual reporting periods afterDecember 15, 2009, except for the requirement to provide the Level 3activity of purchases, sales, issuances, and settlements on a gross basis,which will become effective for interim and annual reporting periods beginningafter December 15, 2010. The Company adopted the updated guidance in thefirst quarter of 2010 and the adoption did not have an impact on the Company’sfinancial position, results of operations, or cash flows.  See Note 5 for more information.

 

In June 2009, the FASBissued new authoritative guidance that amends certain guidance for determiningwhether an entity is a variable interest entity (VIE). The guidance requires anenterprise to perform an analysis to determine whether the Company’s variableinterests give it a controlling financial interest in a VIE. A company would berequired to assess whether it has an implicit financial responsibility toensure that a VIE operates as designed when determining whether it has thepower to direct the activities of the VIE that most significantly impact theentity’s economic performance. In addition, this guidance amends earlierguidance requiring ongoing reassessments of whether an enterprise is theprimary beneficiary of a VIE. The adoption of the provisions of this guidance,which was effective January 1, 2010, did not have a material impact on theconsolidated financial statements.

 

**3.  USE OFESTIMATES**

 

Thepreparation of financial statements in conformity with accounting principlesgenerally accepted in the United States requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the dates of the financial statementsand the reported amounts of revenue and expenses during the reporting periods.The most significant estimates relate to allowance for doubtful accounts,useful lives of the Company’s fixed and finite-lived intangible assets,allocation of purchase price to assets acquired and liabilities assumed inpurchase business combinations, fair value of indefinite-lived intangibleassets, goodwill and income taxes. Actual results could differ significantlyfrom those estimates.

 

**4.  ACQUISTION**

 

*Alltel Assets*

 

OnApril 26, 2010, the Company completed its previously-announced acquisitionof wireless assets from Cellco Partnership d/b/a Verizon Wireless (“Verizon”)pursuant to the Purchase Agreement, dated June 9, 2009, between theCompany and Verizon (the “Alltel Acquisition”).  Pursuant to the PurchaseAgreement, Verizon contributed certain licenses, network assets, tower andother leases and other assets and certain related liabilities to itswholly-owned subsidiary limited liability company, whose membership interestswere acquired by Allied Wireless Communications Corporation (“AWCC”), theCompany’s subsidiary.  In connection with the Alltel Acquisition, theCompany and Verizon entered into roaming and transition services arrangementsand the Company obtained the rights to use the Alltel brand and related servicemarks for up to twenty-eight years in connection with the continuing operationof the acquired assets.

 

TheCompany funded the purchase price of $221.4 million, which included thepurchase of $21.4 million of net working capital, as defined in the PurchaseAgreement, with cash-on-hand and borrowings under its available creditfacility.  On April 26, 2010, the Company drew down a $150 millionterm loan under the Amended and Restated Credit Agreement, dated as ofJanuary 20, 2010, by and among the Company, certain of the Company’ssubsidiaries, as Guarantors, CoBank, ACB, as Administrative Agent,Arranger, Issuer Lender and Lender, and the other Lenders namedtherein.  In addition, the Company alsoborrowed $40 million under its previously undrawn revolving credit facility.

 

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TheAlltel Acquisition was accounted for using the purchase method and AWCC’sresults of operations since April 26, 2010 have been included in the Company’s U.S. Wireless segment as reported inNote 10. The total purchase consideration of $221.4 million cash was allocatedto the assets acquired and liabilities assumed at their estimated fair valuesas of the date of acquisition as determined by management. The table belowrepresents the preliminary assessment of the total acquisition cost to thetangible and intangible assets and liabilities of AWCC based on theiracquisition date fair values:

 
| Total cash consideration                                    |   | $       | 221,359 |   |
|-------------------------------------------------------------|--------|---------|---------|--------|
|                                                        |   |    |    |
| Purchase price allocation:                                  |   |    |    |
| Net working capital                                         |   | $       | 15,817  |   |
| Property, plant and equipment                               |   | 176,393 |    |
| Customer relationships                                      |   | 55,500  |    |
| Telecommunications licenses                                 |   | 44,000  |    |
| Trade name license                                          |   | 13,400  |    |
| Other long term assets                                      |   | 11,500  |    |
| Other long term liabilities                                 |   | (34,211 | )       |
| Deferred tax liabilities                                    |   | (18,016 | )       |
| Non-controlling interests                                   |   | (16,000 | )       |
| Net assets acquired                                         |   | $       | 248,383 |   |
|                                                        |   |    |    |
| Gain on bargain purchase, net of deferred taxes of  $18,016 |   | $       | 27,024  |   |

 

Thegain related to the Alltel Acquisition was a result of a bargain purchasegenerated by the forced divesture of the assets that was required to becompleted by Verizon within a required timeframe to a limited class ofpotential buyers that resulted in a favorable price to the Company for theseassets.  This gain, recognized on thebargain purchase, is included in other income in the accompanying incomestatement for the nine months ended September 30, 2010.  For the three and nine months ended September 30,2010, the Alltel Acquisition accounted for $140.3 million and $242.8 million ofthe Company’s revenue, respectively. The net income for the nine months ended September 30,2010 includes the $27.0 million of bargain purchase gain discussed above. Theweighted average amortization period of the amortizable intangible assets(customer relationships and trade name license) is 12.7 years.

 

Thefollowing table reflects the unaudited pro forma results of operations of theCompany for the three and nine months ended September 30, 2009 and thenine months, ended September 30, 2010 as if the Alltel Acquisition hadoccurred on January 1, 2009 (presented in thousands, except per sharedata):

 
| ** **          | ** ** | **2009**                                                 | ** ** |
|---------------------|------------|----------------------------------------------------------|------------|
| ** **          | ** ** | **Three Months Ended September 30,** | ** ** | **Nine Months ended September 30,** | ** ** |
| ** **          | ** ** | **As Reported**                                     | ** ** | **As Adjusted** | ** ** | **As Reported** | ** ** | **As Adjusted** | ** ** |
| Revenue             |       | $                                                        | 66,092     |   | $ | 239,152 |   | $ | 182,617 |   | $ | 672,156 |   |
| Net income          |       | 11,936                                                   |       | 27,619 |   | 30,374 |   | 64,817 |   |
| Earnings per share: |       |                                                     |       |   |   |   |   |   |   |
| Basic               |       | $                                                        | 0.78       |   | $ | 1.81 |   | $ | 1.99 |   | $ | 4.26 |   |
| Diluted             |       | 0.78                                                     |       | 1.79 |   | 1.98 |   | 4.24 |   |

 
| ** **          | ** ** | **Nine Months ended September 30, 2010** | ** ** |
|---------------------|------------|-------------------------------------------------------------------|------------|
| ** **          | ** ** | **As Reported**                                              | ** ** | **As Adjusted** | ** ** |
| Revenue             |       | $                                                                 | 424,480    |   | $ | 678,092 |   |
| Net income          |       | 35,174                                                            |       | 51,914 |   |
| Earnings per share: |       |                                                              |       |   |   |
| Basic               |       | $                                                                 | 2.30       |   | $ | 3.39 |   |
| Diluted             |       | 2.27                                                              |       | 3.35 |   |

 

Theunaudited pro forma data is presented for illustrative purposes only and is notnecessarily indicative of the operating results that would have occurred if theAlltel Acquisition had been consummated on this date or of future operatingresults of the combined company following this transaction.

 

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**5.  FAIR VALUE MEASUREMENTS**

 

Inaccordance with the provisions of fair value accounting, a fair valuemeasurement assumes that the transaction to sell an asset or transfer aliability occurs in the principal market for the asset or liability or, in theabsence of a principal market, the most advantageous market for the asset orliability and defines fair value based upon an exit price model.

 

Thefair value measurement guidance establishes a fair value hierarchy whichrequires an entity to maximize the use of observable inputs and minimize theuse of unobservable inputs when measuring fair value.  The guidance describes three levels of inputsthat may be used to measure fair value:

 

*Level 1*- Quoted prices in active markets for identicalassets or liabilities as of the reporting date. Active markets are those in which transactions for the asset orliability occur in sufficient frequency and volume to provide pricinginformation on an ongoing basis.  Level 1assets and liabilities include debt and equity securities and derivativecontracts that are traded in an active exchange market.

 

*Level 2*- Observable inputs other than Level 1 prices, suchas quoted prices for similar assets or liabilities; quoted prices in marketsthat are not active; or other inputs that are observable or can be corroboratedby the observable market data for substantially the full term of the assets orliabilities.  Level 2 assets andliabilities include debt securities with quoted prices that are traded lessfrequently than exchange-traded instruments and derivative contracts whosevalue is determined using a pricing model with inputs that are observable inthe market or can be derived principally from or corroborated by observablemarket data.  This category generallyincludes certain U.S. Government and Agency mortgage-backed debt securities,corporate debt securities, and non-exchange traded derivative contracts.

 

*Level 3*- Unobservable inputs that are supported by littleor no market activity and that are significant to the fair value of the assetsor liabilities.  Level 3 assets andliabilities include financial instruments whose value is determined usingpricing models, discounted cash flow methodologies, or similar techniques, aswell as instruments for which the determination of fair value requiressignificant management judgment or estimation.

 

Assetsand liabilities of the Company measured at fair value on a recurring basis asof December 31, 2009 are summarized as follows (in thousands):

 
| **December 31, 2009**               | ** ** |
|-----------------------------------------------|------------|
| **Description**                               | ** ** | **Quoted Prices in  Active Markets  (Level 1)** | ** ** | **Significant Other  Observable Inputs  (Level 2)** | ** ** | **Total** | ** ** |
| Certificates of deposit                       |       | $ | 8,362 |   | $ | — |   | $ | 8,362 |   |
| Money market funds                            |       | 13,091 |   | — |   | 13,091 |   |
| **Total assets measured at fair  value**      |       | $ | 24,453 |   | $ | — |   | $ | 21,453 |   |
|                                          |       |   |   |   |   |   |   |
| Interest rate swap (Note 7)                   |       | $ | — |   | $ | 5,096 |   | $ | 5,096 |   |
| **Total liabilities measured at  fair value** |       | $ | — |   | $ | 5,096 |   | $ | 5,096 |   |

 

Assetsand liabilities of the Company measured at fair value on a recurring basis asof September 30, 2010 are summarized as follows (in thousands):

 
| **September 30, 2010**              | ** ** |
|-----------------------------------------------|------------|
| **Description**                               | ** ** | **Quoted Prices in  Active Markets  (Level 1)** | ** ** | **Significant Other  Observable Inputs  (Level 2)** | ** ** | **Total** | ** ** |
| Certificates of deposit                       |       | $ | 3,360 |   | $ | — |   | $ | 3,360 |   |
| Money market funds                            |       | 7,420 |   | — |   | 7,420 |   |
| **Total assets measured at fair  value**      |       | $ | 7,420 |   | $ | — |   | $ | 10,780 |   |
|                                          |       |   |   |   |   |   |   |
| Interest rate swap (Note 7)                   |       | $ | — |   | $ | 10,189 |   | $ | 10,189 |   |
| **Total liabilities measured at  fair value** |       | $ | — |   | $ | 10,189 |   | $ | 10,189 |   |

 

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*Money Market Funds*

 

Thisasset class consisted of a money market portfolio that is comprised ofsecurities classified within Level 1 of the fair value hierarchy because theyare valued using quoted market prices in active markets.

 

*Certificates of Deposit*

 

Certificatesof deposit are classified within Level 1 of the fair value hierarchy becausethey are valued using quoted prices for similar assets.

 

*Interest Rate Swap*

 

TheCompany’s objectives in using interest rate derivatives are to add stability tointerest expense and to manage its exposure to interest rate movements. Theinterest rate swap is valued using broker quotations.  As such, the interest rate swap is classifiedwithin Level 2.

 

**6.  LONG-TERM DEBT**

 

Long-termdebt comprises the following (in thousands):

 
| ** **             | ** ** | **December 31,  2009** | ** ** | **September 30,  2010** | ** ** |
|------------------------|------------|-----------------------------|------------|------------------------------|------------|
| Notes payable:         |       |                        |       |                         |       |
| Term loans             |       | 73,875                      |       | 267,355                      |       |
| Revolver loan          |       | —                      |       | —                       |       |
| Total outstanding debt |       | 73,875                      |       | 267,355                      |       |
| Less: current portion  |       | (3,694                      | )          | (12,194                      | )          |
| Total long-term debt   |       | 70,181                      |       | 255,161                      |       |
| Less: debt discount    |       | (630                        | )          | (4,354                       | )          |
| Net carrying amount    |       | $                           | 69,551     |                         | $          | 250,807 |   |
|                        |            |                             |            |                              |            |  |  |

 

***2008 Loan Facility***

 

OnSeptember 10, 2008, the Company, as borrower, entered into a creditagreement with CoBank, ACB and other lenders as referenced within the creditagreement (the “2008 CoBank Credit Agreement”). The 2008 CoBank CreditAgreement provided a $75 million term loan (the “2008 Term Loan”) as wellas a $75 million revolving credit facility (the “2008 Revolver Facility”,together with the 2008 Term Loan, the “2008 Credit Facility”). The 2008Revolver Facility included a $5 million letter of credit facility.

 

The2008 Term Loan required quarterly repayments of principal of $0.2 millionthrough June 30, 2013 and quarterly repayments of principal of$1.4 million from September 30, 2013 to June 30, 2015. Theremaining outstanding principal balance was to be repaid on September 10,2015 when the 2008 Term Loan was to mature.

 

Allborrowings under the 2008 Credit Facility were bearing interest at a rate,selected by the Company from one of the options as defined within theagreement, plus a margin. Such interest rate options included (i) a baserate, defined as the greater of the prime rate or the federal funds rate plus0.5%, or (ii) a LIBOR rate. Margins for base rate borrowings ranged from0% to 0.5%, depending upon the Company’s leverage ratio while margins for LIBORborrowings ranged from 1.25% to 2% also depending upon the Company’s leverageratio.

 

The2008 CoBank Credit Agreement contained certain affirmative and negativecovenants of the Company and its subsidiaries. Among other things, thesecovenants restricted the Company’s ability to incur additional debt or to incurliens on its property. The 2008 Credit Agreement also required the Company tomaintain certain financial ratios including a net leverage ratio of less thanor equal to 3.0 to 1, an interest coverage ratio of greater than or equal to3.5 to 1 and an equity to assets ratio of greater than or equal to 0.4 to 1.

 

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***2010 Loan Facilities***

 

On January 20, 2010, the Company amendedand restated its 2008 Credit Facility with CoBank as Administrative Agent (the “2010CoBank Credit Agreement”).  The 2010CoBank Credit Agreement provided for a $298.9 million credit facility,consisting of i) a $73.9 million term loan (the “2010 Term Loan A”) whichwas the amount then outstanding under the 2008 Term Loan, ii) a new$150.0 million term loan (the “2010 Term Loan B”), iii)  a $75.0 million revolver loan (the “2010Revolver Loan”) and iv) one or more additional term loans up to an aggregate$50.0 million, subject to lender and administrative agent approval(together with the 2010 Term Loan A, the 2010 Term Loan B and the 2010 RevolverLoan, the “2010 Credit Facility”).  Asdiscussed in Note 4, the Company partially funded the purchase price of theAlltel Acquisition with the $150 million 2010 Term Loan B and borrowed $40million under the 2010 Revolver Loan.

 

OnSeptember 30, 2010, the Companyentered into a second amended and restatedcredit facility with CoBankas Administrative Agent (the “Amended 2010 CoBank Credit Agreement”).  The Amended 2010 CoBank Credit Agreement provides for a $370.2 million credit facility, consisting of i) a $72.0 million term loan (the “Amended 2010 Term Loan A”), ii) a $148.1 million term loan (the “Amended 2010 Term Loan B”), iii) a new $50.0 million term loan (the “2010Term Loan C”) and iv) an expanded$100.0 million revolver loan of which theCompany may use up to $10.0 million for standby or trade letters of credit andmay use up to $10 million under a swingline sub-facility (the “Amended 2010Revolver Loan,” and together with the Amended 2010 Term Loan A,Amended 2010 Term Loan B and 2010 TermLoan C, the “Amended 2010 Credit Facility”). The Amended 2010 Credit Facility also provides for one or more additional termloans up to an aggregate $50.0 million, subject to lender andadministrative agent approval.

 

Uponthe closing of the Amended 2010 Credit Facility, $72.0 million under theAmended 2010 Term Loan A and $148.1 million under the Amended 2010 Term Loan Bremained outstanding from the Company’s prior credit facility.  Also uponthe closing of the Amended 2010 Credit Facility, the Company drew down $50.0million under the 2010 Term Loan C, a portion of which was used to repayoutstanding borrowings under the Company’s prior revolving loan.  TheCompany currently has no borrowings outstanding under the Amended 2010 RevolverLoan.

 

The Amended 2010 Term Loan A, the Amended 2010Term Loan B and the 2010 Term Loan C eachmature on September 30, 2014, with certain quarterly repayment obligationsdescribed below, unless accelerated pursuant to an event of default, asdescribed below.  The Amended 2010Revolver Loan matures on September 10, 2014, unless accelerated pursuantto an event of default, as described below. Amounts borrowed under the Amended2010 Term Loan A, Amended 2010 Term Loan B, 2010 Term Loan C and the Amended2010 Revolver Loan bear interest at a rate equal to, at the Company’s option,either (i) the London Interbank Offered Rate (LIBOR) plus an applicablemargin ranging between 3.50% to 4.75% or (ii) a base rate plus anapplicable margin ranging from 2.50% to 3.75% (or, in the case of amountsborrowed under the swingline sub-facility to the Amended 2010 Revolver Loan, anapplicable margin ranging from 2.00% to 3.25%). The Company is not required to apply a minimum LIBOR percentage for anyloans bearing interest at the LIBOR rate. The base rate is equal to the higherof either (i) 1.50% plus the higher of (x) the one-week LIBOR and(y) the one-month LIBOR and (ii) the prime rate (as defined in thecredit agreement). The applicable margin is determined based on the ratio ofthe Company’s indebtedness (as defined in the credit agreement) to its EBITDA(as defined in the credit agreement). Borrowings as of September 30, 2010, after considering the effectof the interest rate swap agreement as described in Note 7, were bearing aweighted-average interest rate of 5.26%.

 

All amounts outstanding under the Amended 2010Revolver Loan will be due and payable on September 10, 2014 or the earlieracceleration of the loan upon an event of default.  Amounts outstanding under the Amended 2010Term Loan A and the Amended 2010 Term Loan B became due and payable commencingon September 30, 2010, in quarterly payments equal to 1.25% of the initialprincipal amount outstanding under each loan, increasing to 2.50% of theinitial principal amount outstanding commencing on March 31, 2012.  The 2010 Term Loan C will become due andpayable commencing on December 31, 2010, in quarterly payments equal to$250,000. Remaining balances will be due and payable upon the final maturitydate of September 30, 2014, unless the loans are earlier accelerated uponan event of default.  The Company mayprepay the Amended 2010 Credit Facility at any time without premium or penalty,other than customary fees for the breakage of LIBOR loans.  Under the terms of the Amended 2010 CreditFacility, the Company must also pay a fee ranging from 0.50% to 0.75% of theaverage daily unused portion of the Amended 2010 Revolver Loan over eachcalendar quarter, which fee is payable in arrears on the last day of eachcalendar quarter.

 

Certain of our subsidiaries, including ourprincipal wholly-owned domestic operating subsidiaries, are guarantors of ourobligations under the Amended 2010 CoBank Credit Agreement. Further, ourobligations are secured by (i) a first priority, perfected lien onsubstantially all of our property and assets and that of the guarantorsubsidiaries, and (ii) a pledge of 100% of the Company’s equity interestsin certain domestic subsidiaries and up to 65% of the equity interestsoutstanding of certain foreign subsidiaries, in each case, including theCompany’s principal operating subsidiaries.

 

The Amended 2010 CoBank Credit Agreementcontains customary representations, warranties and covenants, includingcovenants by the Company limiting additional indebtedness, liens, guaranties,mergers and consolidations, substantial asset sales, investments and loans,sale and leasebacks, transactions with affiliates and fundamental changes. Inaddition, the Amended 2010 CoBank Credit Agreement contains financial covenantsby the Company that (i) impose a maximum ratio of indebtedness (as definedin the credit agreement) to EBITDA (as defined in the credit agreement),(ii) require a minimum ratio of EBITDA to cash interest expense,(iii) require a minimum ratio of equity to consolidated assets and(iv) require a minimum ratio of EBITDA to fixed charges (as defined in thecredit agreement). As of September 30, 2010, the Company was in compliancewith all of the financial covenants of the Amended 2010 CoBank CreditAgreement.

 

The Amended 2010 CoBank Agreement provides forevents of default customary for credit facilities of this type, including butnot limited to non-payment, defaults on other debt, misrepresentation, breachof covenants, representations and warranties, insolvency and bankruptcy. Afterthe occurrence of an event of default and for so long as it continues, theadministrative agent or the requisite lenders (as defined in the creditagreement) may increase the interest rate then in effect on all outstandingobligations by 2.0%. Upon an event of default relating to insolvency,bankruptcy or receivership, the amounts outstanding under the Amended 2010Credit Facility will become immediately due and payable and the lendercommitments will be automatically terminated. Upon the occurrence andcontinuation of any other event of default, the administrative agent and/or therequisite lenders (as defined in the credit agreement) may accelerate paymentof all obligations and terminate the lenders’ commitments under the Amended2010 CoBank Agreement.

 

**7.  DERIVATIVEINSTRUMENTS AND HEDGING ACTIVITIES**

 

                                                As required bythe FASB’s authoritative guidance on accounting for derivative instruments andhedging activities, the Company records all derivatives on the balance sheet atfair value. The accounting for changes in the fair value of derivatives dependson the intended use of the derivative, whether the Company has elected todesignate a derivative in a hedging relationship and apply hedge accounting andwhether the hedging relationship has satisfied the criteria necessary to applyhedge accounting. Derivatives

 

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designatedand qualifying as a hedge of the exposure to changes in the fair value of anasset, liability, or firm commitment attributable to a particular risk, such asinterest rate risk, are considered fair value hedges. Derivatives designatedand qualifying as a hedge of the exposure to variability in expected futurecash flows, or other types of forecasted transactions, are considered cash flowhedges. Hedge accounting generally provides for the matching of the timing ofgain or loss recognition on the hedging instrument with the recognition of thechanges in the fair value of the hedged asset or liability that areattributable to the hedged risk in a fair value hedge or the earnings effect ofthe hedged forecasted transactions in a cash flow hedge. The Company may enterinto derivative contracts that are intended to economically hedge certain ofits risk, even though hedge accounting does not apply or the Company elects notto apply hedge accounting.

 

***Risk Management Objective of UsingDerivatives***

 

TheCompany is exposed to certain risks arising from both its business operationsand economic conditions. The Company principally manages its exposures to awide variety of business and operational risks through management of its corebusiness activities. The Company manages economic risks related to interestrates primarily by managing the amount, sources, and duration of its debtfunding and the use of derivative financial instruments. Specifically, theCompany entered into derivative financial instruments to manage exposures thatarise from business activities that result in the payment of future known anduncertain cash amounts, the value of which are determined by interest rates.The Company’s derivative financial instruments are used to manage differencesin the amount, timing, and duration of its known or expected cash paymentsprincipally related to the Company’s borrowings.

 

***Cash Flow Hedge of Interest Rate Risk***

 

TheCompany’s objectives in using interest rate derivatives are to add stability tointerest expense and to manage its exposure to interest rate movements. Toaccomplish this objective, the Company primarily uses an interest rate swap aspart of its interest rate risk management strategy. Interest rate swapsdesignated as cash flow hedges involve the receipt of variable-rate amountsfrom a counterparty in exchange for the Company making fixed-rate payments overthe life of the agreements without exchange of the underlying notional amount.

 

Theeffective portion of changes in the fair value of interest rate swapsdesignated and that qualify as cash flow hedges is recorded in AccumulatedOther Comprehensive Income and is subsequently reclassified into earnings inthe period that the hedged forecasted transaction affects earnings.  The Company uses its derivatives to hedge thevariable cash flows associated with existing variable-rate debt. Theineffective portion of the change in fair value of the derivative is recognizeddirectly in earnings. No hedge ineffectiveness was recognized during the threeand nine months ended September 30, 2009 and 2010.

 

Asof December 31, 2009 the Company’s sole derivative instrument was aninterest rate swap with a notional amount of $68 million that wasdesignated as a cash flow hedge of interest rate risk. On July 26, 2010,the Company executed an additional interest rate swap with a notional amount of$30 million that was also designated as a cash flow hedge of interest rate riskbringing the total notional amount of cash flow hedges to $98 million as of September 30,2010.

 

Amountsreported in accumulated other comprehensive income related to the interest rateswaps are reclassified to interest expense as interest payments are accrued onthe Company’s variable-rate debt. Through September 30, 2011, the Companyestimates that an additional $3.2 million will be reclassified as anincrease to interest expense due to the interest rate swaps since the hedgeinterest rate exceeds the variable interest rate on the debt.

 

Thetable below presents the fair value of the Company’s derivative financialinstrument as well as its classification on the consolidated balance sheet asof December 31, 2009 and September 30, 2010 (in thousands):

 
| ** **                                           | ** ** | **Liability Derivatives**       | ** ** |
|------------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                           | ** ** | ** **                           | ** ** | **Fair Value as of** | ** ** |
| ** **                                           | ** ** | **Balance Sheet Location** | ** ** | **December 31,  2009** | ** ** | **September 30,  2010** | ** ** |
| Derivatives designated as hedging instruments:       |       |                                 |       |   |   |   |   |
| Interest Rate Swap                                   |       | Other liabilities                    |       | $ | 5,096 |   | $ | 10,189 |   |
| Total derivatives designated as hedging  instruments |       |                                 |       | $ | 5,096 |   | $ | 10,189 |   |

 

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Thetable below presents the effect of the Company’s derivative financialinstruments on the consolidated income statements for the three months endedSeptember 30, 2009 and 2010 (in thousands):

 
| **Three Months Ended September 30,** | ** ** | **Derivative in Cash Flow  Hedging Relationships** | ** ** | **Amount of Gain or  (Loss) Recognized  in OCI on Derivative  (Effective Portion)** | ** ** | **Location of Gain or  (Loss) Reclassified  from Accumulated  OCI into Income  (Effective Portion)** | ** **       | **Amount of Gain or  (Loss) Reclassified  from Accumulated  OCI into Income  (Effective Portion)** | ** ** |
|----------------------------------------------------------|------------|------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------|------------------|--------------------------------------------------------------------------------------------------------------------------------------------|------------|
| 2009                                                     |       | Interest Rate Swap                                                     |       | $                                                                                                                           | (1,439     | )                                                                                                                                            | Interest expense |                                                                                                                                       | $          | 719 |   |
| 2010                                                     |       | Interest Rate Swap                                                     |       | (2,010                                                                                                                      | )          | Interest expense                                                                                                                             |             | 781                                                                                                                                        |       |
|                                                          |            |                                                                        |            |                                                                                                                             |            |                                                                                                                                              |                  |                                                                                                                                            |            |  |  |

 

Thetable below presents the effect of the Company’s derivative financialinstruments on the consolidated income statements for the nine months endedSeptember 30, 2009 and 2010 (in thousands):

 
| **Nine Months Ended September 30,** | ** ** | **Derivative in Cash Flow  Hedging Relationships** | ** ** | **Amount of Gain or  (Loss) Recognized  in OCI on Derivative  (Effective Portion)** | ** ** | **Location of Gain or  (Loss) Reclassified  from Accumulated  OCI into Income  (Effective Portion)** | ** **       | **Amount of Gain or  (Loss) Reclassified  from Accumulated  OCI into Income  (Effective Portion)** | ** ** |
|---------------------------------------------------------|------------|------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------|------------------|--------------------------------------------------------------------------------------------------------------------------------------------|------------|
| 2009                                                    |       | Interest Rate Swap                                                     |       | $                                                                                                                           | 1,652      |                                                                                                                                         | Interest expense |                                                                                                                                       | $          | 2,067 |   |
| 2010                                                    |       | Interest Rate Swap                                                     |       | (5,093                                                                                                                      | )          | Interest expense                                                                                                                             |             | 2,203                                                                                                                                      |       |
|                                                         |            |                                                                        |            |                                                                                                                             |            |                                                                                                                                              |                  |                                                                                                                                            |            |  |  |

 

***Credit-risk-related Contingent Features***

 

TheCompany has agreements with its derivative counterparties that contain aprovision where if the Company defaults on any of its indebtedness, includingdefault where repayment of the indebtedness has not been accelerated by thelender, then the Company could also be declared in default on its derivativeobligations.

 

Asof September 30, 2010, the fair value of the interest rate swaps liabilityposition related to these agreements was $10.2 million. As ofSeptember 30, 2010, the Company has not posted any collateral related tothese agreements. If the Company had breached any of these provisions atSeptember 30, 2010, it would have been required to settle its obligationsunder these agreements at their termination values of $10.2 million.

 

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**8.  RECONCILIATION OF TOTAL EQUITY**

 

Totalequity was as follows (in thousands):

 
| ** **                                               | ** ** | **Nine Months Ended September 30,** | ** ** |
|----------------------------------------------------------|------------|---------------------------------------------------------|------------|
| ** **                                               | ** ** | **2009**                                                | ** ** | **2010** | ** ** |
| ** **                                               | ** ** | **Atlantic Tele-  Network, Inc.**             | ** ** | **Non-Controlling  Interests** | ** ** | **Total Equity** | ** ** | **Atlantic Tele-  Network, Inc.** | ** ** | **Non-Controlling  Interests** | ** ** | **Total  Equity** | ** ** |
| Equity, beginning of period                              |       | $                                                       | 228,873    |   | $ | 32,787 |   | $ | 261,660 |   | $ | 255,746 |   | $ | 26,687 |   | $ | 282,433 |   |
| Stock based compensation                                 |       | 1,019                                                   |       | — |   | 1,019 |   | 1,537 |   | — |   | 1,537 |   |
| Comprehensive income:                                    |       |                                                    |       |   |   |   |   |   |   |   |   |   |   |
| Net income                                               |       | 30,374                                                  |       | 976 |   | 31,350 |   | 35,174 |   | (212 | ) | 34,962 |   |
| Other comprehensive income(loss)-                        |       |                                                    |       |   |   |   |   |   |   |   |   |   |   |
| Translation Adjustment                                   |       | —                                                  |       | — |   | — |   | (8 | ) | — |   | (8 | ) |
| Gain (loss) on interest rate swap (net of tax)           |       | 1,036                                                   |       | — |   | 1,036 |   | (3,057 | ) | — |   | (3,057 | ) |
| Total comprehensive income                               |       | 31,410                                                  |       | 976 |   | 32,386 |   | 32,109 |   | (212 | ) | 31,899 |   |
| Issuance of common stock upon exercise of stock  options |       | 74                                                      |       | — |   | 74 |   | 1,552 |   | — |   | 1,552 |   |
| Dividends on common stock                                |       | (8,531                                                  | )          | — |   | (8,531 | ) | (9,506 | ) | — |   | (9,506 | ) |
| Non-controlling interests of acquired business           |       | (23                                                     | )          | (2 | ) | (25 | ) | — |   | 17,947 |   | 17,947 |   |
| Distributions to non-controlling interests               |       | —                                                  |       | (5,543 | ) | (5,543 | ) | — |   | (1,237 | ) | (1,237 | ) |
| Investments made by minority shareholders                |       | —                                                  |       | 781 |   | 781 |   | — |   | 3,338 |   | 3,338 |   |
| Purchase of common shares                                |       | (23                                                     | )          | — |   | (23 | ) | — |   | — |   | — |   |
| Equity, end of period                                    |       | $                                                       | 252,799    |   | $ | 28,999 |   | $ | 281,798 |   | $ | 281,438 |   | $ | 46,523 |   | $ | 327,961 |   |

 

**9.  NET INCOMEPER SHARE**

 

Forthe three and nine months ended September 30, 2009 and 2010, outstandingstock options were the only potentially dilutive securities.

 

Thereconciliation from basic to diluted weighted average common shares outstandingis as follows (in thousands):

 
| ** **                                         | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|----------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                         | ** ** | **2009**                                             | ** ** | **2010**                                            | ** ** | **2009** | ** ** | **2010** | ** ** |
| Basic weighted average common shares outstanding   |       | 15,237                                               |       | 15,349                                              |       | 15,233 |   | 15,303 |   |
| Stock options                                      |       | 161                                                  |       | 153                                                 |       | 71 |   | 173 |   |
| Diluted weighted average common shares outstanding |       | 15,398                                               |       | 15,502                                              |       | 15,304 |   | 15,476 |   |

 

Theabove calculations for the three months ended September 30, 2010 do notinclude 156,000 shares related to certain stock options because the effects ofsuch were anti-dilutive. For the nine months ended September 30, 2009 and2010, the calculation does not include 219,000 and 111,000 shares, respectively,related to certain stock options because the effect of such options wereanti-dilutive.

 

**10. SEGMENT REPORTING**

 

Uponthe completion of the Alltel Acquisition, the Company restructured how itmanages its business, and accordingly, modified its reportable segments.  The previously reported Rural Wirelesssegment has been combined with the operating results of Alltel and is now beingreported as the U.S. Wireless segment, which generates all of its revenue andhas all of its assets located in the United States.   In addition, the previously reportedWireless Data segment has been merged into the Island Wireless segment whichgenerates its revenue, and has its assets, in Bermuda, Turks and Caicos, theU.S. Virgin Islands and Aruba. Integrated Telephony — International has been renamed InternationalIntegrated

 

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Telephonyand has its assets located in Guyana. Integrated Telephony — Domestic has been renamed U.S. Wireline, and hasits assets located in the United States. The operating segments are managed separately because each offersdifferent services and serves different markets.  Reconciling items refer to corporate overheadmatters including general and administrative expenses and acquisition-relatedcharges.

 

Thefollowing tables provide information for each operating segment (inthousands).  Previously reported periodshave been restated, showing the effects of the new segment structure:

 
| ** **                        | ** ** | **For the Three Months Ended September 30, 2009** | ** ** |
|-----------------------------------|------------|--------------------------------------------------------------------------------------|------------|
| ** **                        | ** ** | **U.S. Wireless**                                                               | ** ** | **International  Integrated  Telephony** | ** ** | **Island  Wireless** | ** ** | **U.S.  Wireline** | ** ** | **Reconciling  Items** | ** ** | **Consolidated** | ** ** |
| Revenue                           |       |                                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| U.S. Wireless:                    |       |                                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Retail                            |       | $                                                                                    | —     |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| Wholesale                         |       | 31,837                                                                               |       | — |   | — |   | — |   | — |   | 31,837 |   |
| International Wireless            |       | —                                                                               |       | 5,525 |   | 6,159 |   | — |   | — |   | 11,684 |   |
| Wireline                          |       | —                                                                               |       | 17,185 |   | — |   | 4,784 |   | — |   | 21,969 |   |
| Equipment and Other               |       | —                                                                               |       | — |   | 602 |   | — |   | — |   | 602 |   |
| Total Revenue                     |       | 31,837                                                                               |       | 22,710 |   | 6,761 |   | 4,784 |   | — |   | 66,092 |   |
| Depreciation and amortization     |       | 3,812                                                                                |       | 4,180 |   | 1,131 |   | 567 |   | 73 |   | 9,763 |   |
| Non-cash stock-based compensation |       | —                                                                               |       | — |   |   |   | 32 |   | 332 |   | 364 |   |
| Operating income (loss)           |       | 17,563                                                                               |       | 7,291 |   | (334 | ) | (71 | ) | (1,300 | ) | 23,149 |   |
|                                   |            |                                                                                      |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 
| ** **                        | ** ** | **For the Three Months Ended September 30, 2010** | ** ** |
|-----------------------------------|------------|--------------------------------------------------------------------------------------|------------|
| ** **                        | ** ** | **U.S. Wireless**                                                               | ** ** | **International  Integrated  Telephony** | ** ** | **Island  Wireless** | ** ** | **U.S.  Wireline** | ** ** | **Reconciling  Items** | ** ** | **Consolidated** | ** ** |
| Revenue                           |       |                                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| U.S. Wireless:                    |       |                                                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Retail                            |       | $                                                                                    | 108,828    |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | 108,828 |   |
| Wholesale                         |       | 49,952                                                                               |       | — |   | — |   | — |   | — |   | 49,952 |   |
| International Wireless            |       | —                                                                               |       | 6,468 |   | 7,752 |   | — |   | — |   | 14,220 |   |
| Wireline                          |       | 139                                                                                  |       | 15,668 |   | — |   | 5,022 |   | — |   | 20,829 |   |
| Equipment and Other               |       | 10,537                                                                               |       | — |   | 594 |   | — |   | — |   | 11,131 |   |
| Total Revenue                     |       | 169,456                                                                              |       | 22,136 |   | 8,346 |   | 5,022 |   | — |   | 204,960 |   |
| Depreciation and amortization     |       | 17,012                                                                               |       | 4,575 |   | 1,522 |   | 746 |   | 119 |   | 23,974 |   |
| Non-cash stock-based compensation |       | —                                                                               |       | — |   | — |   | — |   | 556 |   | 556 |   |
| Operating income (loss)           |       | 13,985                                                                               |       | 6,416 |   | (2,126 | ) | 1 |   | (4,450 | ) | 13,826 |   |
|                                   |            |                                                                                      |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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| ** **                        | ** ** | **For the Nine Months Ended September 30, 2009** | ** ** |
|-----------------------------------|------------|-------------------------------------------------------------------------------------|------------|
| ** **                        | ** ** | **U.S. Wireless**                                                              | ** ** | **International  Integrated  Telephony** | ** ** | **Island  Wireless** | ** ** | **U.S.  Wireline** | ** ** | **Reconciling  Items** | ** ** | **Consolidated** | ** ** |
| Revenue                           |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |
| U.S. Wireless:                    |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |
| Retail                            |       | $                                                                                   | —     |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   |
| Wholesale                         |       | 79,276                                                                              |       | — |   | — |   | — |   | — |   | 79,276 |   |
| International Wireless            |       | —                                                                              |       | 15,628 |   | 18,097 |   | — |   | — |   | 33,725 |   |
| Wireline                          |       | —                                                                              |       | 52,513 |   | — |   | 14,121 |   | — |   | 66,634 |   |
| Equipment and Other               |       | —                                                                              |       | — |   | 2,982 |   | — |   | — |   | 2,982 |   |
| Total Revenue                     |       | 79,276                                                                              |       | 68,141 |   | 21,079 |   | 14,121 |   | — |   | 182,617 |   |
| Depreciation and amortization     |       | 10,661                                                                              |       | 12,560 |   | 3,349 |   | 1,966 |   | 220 |   | 28,756 |   |
| Non-cash stock-based compensation |       | —                                                                              |       | — |   | — |   | 95 |   | 924 |   | 1,019 |   |
| Operating income (loss)           |       | 39,381                                                                              |       | 22,767 |   | (2,164 | ) | (1,106 | ) | (840 | ) | 58,038 |   |
|                                   |            |                                                                                     |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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| ** **                        | ** ** | **For the Nine Months Ended September 30, 2010** | ** ** |
|-----------------------------------|------------|-------------------------------------------------------------------------------------|------------|
| ** **                        | ** ** | **U.S. Wireless**                                                              | ** ** | **International  Integrated  Telephony** | ** ** | **Island  Wireless** | ** ** | **U.S.  Wireline** | ** ** | **Reconciling  Items** | ** ** | **Consolidated** | ** ** |
| Revenue                           |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |
| U.S. Wireless:                    |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |
| Retail                            |       | $                                                                                   | 190,331    |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | 190,331 |   |
| Wholesale                         |       | 112,437                                                                             |       | — |   | — |   | — |   | — |   | 112,437 |   |
| International Wireless            |       | —                                                                              |       | 18,342 |   | 19,370 |   | — |   | — |   | 37,712 |   |
| Wireline                          |       | 220                                                                                 |       | 49,418 |   | — |   | 14,942 |   | — |   | 64,580 |   |
| Equipment and Other               |       | 17,833                                                                              |       | — |   | 1,587 |   | — |   | — |   | 19,420 |   |
| Total Revenue                     |       | 320,821                                                                             |       | 67,760 |   | 20,957 |   | 14,942 |   | — |   | 424,480 |   |
| Depreciation and amortization     |       | 33,610                                                                              |       | 13,102 |   | 3,463 |   | 2,172 |   | 238 |   | 52,585 |   |
| Non-cash stock-based compensation |       | —                                                                              |       | — |   | — |   | — |   | 1,537 |   | 1,537 |   |
| Operating income (loss)           |       | 38,946                                                                              |       | 21,771 |   | (3,710 | ) | (110 | ) | (27,875 | ) | 29,022 |   |
|                                   |            |                                                                                     |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 
| ** **                   | ** ** | **Segment Assets** | ** ** |
|------------------------------|------------|-------------------------|------------|
| ** **                   | ** ** | **U.S. Wireless**  | ** ** | **International  Integrated  Telephony** | ** ** | **Island  Wireless** | ** ** | **U.S.  Wireline** | ** ** | **Reconciling  Items** | ** ** | **Consolidated** | ** ** |
| **December 31, 2009:**  |       |                    |       |   |   |   |   |   |   |   |   |   |   |
| Net fixed assets             |       | $                       | 68,560     |   | $ | 117,931 |   | $ | 20,749 |   | $ | 8,829 |   | $ | 946 |   | $ | 217,015 |   |
| Goodwill                     |       | 32,148                  |       | — |   | 722 |   | 7,491 |   | — |   | 40,361 |   |
| Total assets                 |       | 147,639                 |       | 152,936 |   | 49,734 |   | 24,898 |   | 71,347 |   | 446,554 |   |
| **September 30, 2010:** |       |                    |       |   |   |   |   |   |   |   |   |   |   |
| Net fixed assets             |       | $                       | 270,749    |   | $ | 125,424 |   | 32,529 |   | 8,415 |   | 4,065 |   | 441,182 |   |
| Goodwill                     |       | 32,148                  |       | — |   | 722 |   | 7,491 |   | — |   | 40,361 |   |
| Total assets                 |       |                    |       |   |   |   |   |   |   |   |   |   |   |
|                              |            |                         |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 
| ** **                                          | ** ** | **Capital Expenditures** | ** ** |
|-----------------------------------------------------|------------|-------------------------------|------------|
| ** **                                          | ** ** | **US Wireless**          | ** ** | **International  Integrated  Telephony** | ** ** | **Island  Wireless** | ** ** | **US  Wireline** | ** ** | **Reconciling  Items** | ** ** | **Consolidated** | ** ** |
| **Nine Months Ended  September 30,** |       |                          |       |   |   |   |   |   |   |   |   |   |   |
| 2009                                                |       | $                             | 18,512     |   | $ | 14,975 |   | $ | 5,985 |   | $ | 787 |   | $ | 14 |   | $ | 40,273 |   |
| 2010                                                |       | 54,269                        |       | 20,225 |   | 12,393 |   | 1,388 |   | 3,357 |   | 91,632 |   |
|                                                     |            |                               |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

**11.  COMMITMENTSAND CONTINGENCIES**

 

**Regulatory and Litigation Matters**

 

The Company and its subsidiaries are subject to certain regulatory andlegal proceedings and other claims arising in the ordinary course of business,some of which involve claims for damages and taxes that are substantial inamount. The Company believes that, except for the items discussed below andthose discussed in our Annual Report on Form 10-K for the year endedDecember 31, 2009, for which the Company is currently unable to predictthe final outcome, the disposition of proceedings currently pending will nothave a material adverse effect on the Company’s financial position or resultsof operations.

 

***Regulatory***

 

The Company’s wireless and wireline operations in the United States andin the U.S. Virgin Islands are governed by the Communications Act of 1934, asamended, the implementing regulations adopted thereunder by the FederalCommunications Commission, judicial and regulatory decisions and other federaland state statutes.  In addition, certainof the Company’s subsidiaries are subject to additional regulation in theUnited States in connection with their acceptance of stimulus award grantspursuant to the American Recovery and Reinvestment Act of 2009.  The Company’s Bermuda operations are subjectto Bermuda’s Telecommunications Act of 1986. The Company’s Turks and Caicos operations are subject to the Turks andCaicos Islands Telecommunications Ordinance of 2004.

 

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The Company is subject to regulation in Guyana under the provisions ofour licenses to provide telecommunications services in Guyana and under theGuyana Public Utilities Commission Act of 1999 and the GuyanaTelecommunications Act of 1990.  TheCompany also has certain significant rights and obligations pursuant to theagreement with the Government of Guyana by which the Company acquired itsinterest in GT&T in 1991.  Finally,because of the large volume of traffic that our Guyana operations have with theUnited States, they can also be significantly affected by orders of U.S.regulatory agencies.

 

Currently, the Company holds an exclusive license to provide domesticfixed services and international voice and data services in Guyana.  The license, whose initial term of twentyyears is scheduled to expire at the end of 2010, allows for the Company, at itsoption, to extend the term for an additional twenty years,  until December 2030.  The Company sent notice of the renewal of thelicense, in accordance with the terms of its agreement with the Government ofGuyana, in November of 2009.  Since2001, the Government of Guyana has stated its intention to introduce additionalcompetition into Guyana’s telecommunications sector.  Since that time, the Company has met onseveral occasions with the Government of Guyana to discuss potentialmodifications of its exclusivity and other rights under the existing agreement.  In early October 2010, the Government ofGuyana released to existing telecommunications providers in Guyana certainmaterials, including drafts of legislation, regulations, and licenses (“DraftLaws”), that, if enacted, would permit other telecommunications carriers toreceive licenses to provide domestic fixed services and international voice anddata services in Guyana, in contravention of the Company’s existing exclusivelicense.  The Draft Laws would alsointroduce material changes to many other features of Guyana’s existingtelecommunications regulatory regime.  Inexercising the Company’s option to renew its licenses in 2009, the Companyreiterated to the Government that the Company would be willing to voluntarilyrelinquish the exclusivity aspect of our licenses, but only as part of anoverall settlement agreement with the Government.  At this time, the Company does not know whenor if the Draft Laws will be adopted by the Government of Guyana, or if changeswill be made to the substance of the Draft Laws, including the termination ofATN’s exclusivity rights.  Although webelieve that we would be entitled to damages or other compensation for anyinvoluntary termination of the exclusive license, we cannot guarantee that wewould prevail in a proceeding to enforce our rights or that our actions wouldeffectively halt any unilateral action by the Government.

 

***Litigation***

 

We are involved in several legal claims regarding our tax filings withthe Guyana Inland Revenue dating back to 1991 regarding the deductibility ofintercompany advisory fees as well as other tax assessments. Should we be heldliable for any of the disputed tax assessments, totaling $36.8 million(including an assessment for $13.3 million that we received in July 2010),we believe that the government of Guyana would then be obligated to reimburseus for any amounts that would reduce our return on investment to less than 15%per annum for the relevant periods.

 

In addition, we are currently involved in several legal challenges toour exclusive license under Guyana’s constitution, which have remained pendingfor anywhere from one to ten years.  Webelieve that any legal challenge to our exclusive license granted in 1990,including lawsuits filed in 2000 by Inet Communications, Inc., in 2002 byan individual and in 2009 by Digicel, are without merit, and we have and willcontinue to vigorously defend against such legal challenges.

 

For all of the above regulatory, litigation, or related matters, webelieve some adverse outcome is probable and have accordingly accrued$5.0 million as of September 30, 2010.

 

***Other***

 

The Company is currently disputingcertain invoices it received relating to certain acquisition-relatedcharges.  A portion of these disputedinvoices is included in the accompanying statements of operations for the threeand nine months ended September 30, 2010.

 

**12.  SUBSEQUENT EVENTS**

 

In early October 2010, the Government of Guyana released toexisting telecommunications providers in Guyana certain materials, includingdrafts of legislation, regulations, and licenses (“Draft Laws”), that, ifenacted, would permit other telecommunications carriers to receive licenses toprovide domestic fixed services and international voice and data services inGuyana, in contravention of the Company’s existing exclusive license.  The Draft Laws would also introduce materialchanges to many other features of Guyana’s existing telecommunicationsregulatory regime.  At this time, theCompany does not know when or if the Draft Laws will be adopted by the Governmentof Guyana, or if changes will be made to the substance of the Draft Laws,including the termination of ATN’s exclusivity rights.

 

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**ITEM 2.  MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF****OPERATIONS**

 

*The discussion and analysis of our financial condition and results ofoperations that follows are based upon our condensed consolidated financialstatements, which have been prepared in accordance with accounting principlesgenerally accepted in the United States. The preparation of our financialstatements requires us to make estimates and judgments that affect the reportedamounts of assets and liabilities, revenues and expenses, and the relateddisclosure of contingent assets and liabilities at the date of our financialstatements. Actual results may differ significantly from these estimates underdifferent assumptions or conditions. This discussion should be read inconjunction with our condensed consolidated financial statements herein and theaccompanying notes thereto, and our Annual Report on Form 10-K for theyear ended December 31, 2009, in particular, the information set forththerein under Item 7. “Management’s Discussion and Analysis of FinancialCondition and Results of Operations”.*

 

**Overview**

 

We provide the following telecommunications services, through ouroperating subsidiaries, in North America, Bermuda and the Caribbean:

 

·                  ***Wireless.***  In the UnitedStates, we offer wireless voice and data services to retail customers under the“Alltel” name in rural markets located principally in the Southeast andMidwest.  Additionally, we offerwholesale wireless voice and data roaming services to national, regional andlocal wireless carriers in rural markets located principally in the Southwestand Midwest United States.  We also offerwireless voice and data services to retail customers in Guyana under the “Cellink”name, in Bermuda under the “CellularOne” name, in Turks and Caicos under the “Islandcom”name, in the U.S. Virgin Islands under the “Choice” name and in other smallermarkets in the U.S. and Caribbean.

 

·                  ***Wireline.***  Our localtelephone and data services include our operations in Guyana under the “GT&T”name and in the United States under the “Sovernet” and “ION” names.  In Guyana, we are the exclusive provider ofdomestic wireline local and long distance telephone services and also provideinternational voice and data services. We offer facilities-based integratedvoice and data communications services to residential and business customers inNew England, primarily in Vermont, and wholesale transport services in New YorkState.

 

ATN was incorporated in Delaware in 1987, and since that time, hasengaged in strategic acquisitions and investments to grow the Company’soperations.  From 1998 through 2005, asignificant majority of our revenue was derived from our wireless and wirelineoperations in Guyana, in which we have owned an 80% interest since 1991.  We also derived a portion of our revenue froma non-controlling investment made in 1998 in a voice and data services providerin Bermuda.  The Company has been aprovider of fixed and portable wireless broadband data and dial-up internetservices through our U.S. Virgin Islands subsidiary, acquired in 1999, whichprovided a small portion of the Company’s annual revenues.  In the past five years, we have addedsubstantially to the diversity of our business and reduced our historicaldependence on our Guyana operations for our financial results.  We entered the U.S. telecommunications marketthrough the 2005 acquisition of an operator of a wholesale wireless network inrural portions of the Southwest and Midwest and we continued our U.S. expansionwith the 2006 acquisition of a wireline voice, broadband data and dial-upservice provider in New England.  In 2008,we increased our investment in our Bermuda business to a controlling 58%interest and entered into new U.S. and Caribbean markets with investments intwo early stage businesses providing wholesale transport services in New YorkState and wireless voice and data services in Turks and Caicos.  In addition to the diversification of ourbusiness through acquisition, we have further accentuated our focus on our U.S.operations with increased capital investment in and growth of our wholesalewireless business, which was the single largest contributor to our revenue andoperating income in 2009.

 

In the second quarter of 2010, we completed the acquisition of our U.S.retail wireless business, which provides wireless voice and data services inrural markets of the United States under the “Alltel” brand name (the “AlltelAcquisition”).  Also during that quarter,we completed an investment in a wireless telecommunications provider in Aruba,in which we hold a controlling interest. With the completion of the Alltel Acquisition, we continued our trendtowards growth in U.S.-sourced revenue, with the U.S. wireless portion of ourbusiness now constituting a significant majority of the Company’s consolidatedrevenue.  Of course, we continue toactively evaluate additional investment and acquisition opportunities in theUnited States and the Caribbean that meet our return-on-investment and otheracquisition criteria.

 

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The following chart summarizes the operating activities of ourprincipal subsidiaries, the segments in which we report their revenue and themarkets they serve as of September 30, 2010:

 
| **Services** | ** ** | **Segment**                         | ** ** | **Markets**                                            |
|--------------|------------|-------------------------------------|------------|--------------------------------------------------------|
| **Wireless** |       | U.S. Wireless                       |       | United States (rural  markets)                         |
| ** **   |       | International Integrated  Telephony |       | Guyana                                                 |
| ** **   |       | Island Wireless                     |       | Bermuda, Turks and Caicos,  U.S. Virgin Islands, Aruba |
| **Wireline** |       | International Integrated  Telephony |       | Guyana                                                 |
| ** **   |       | U.S. Wireline                       |       | United States (New England  and New York State)        |

 

Weprovide management, technical, financial, regulatory, and marketing services toour subsidiaries and typically receive a management fee equal to approximately3% to 5% of their respective revenue. Management fees from consolidatedsubsidiaries are eliminated in consolidation. For information about our business segments and geographical informationabout our revenue, operating income and long-lived assets, see Note 10 tothe Consolidated Financial Statements included in this Report.

 

As discussed above, we have historically been dependent on ourwholesale U.S. wireless business and International Integrated Telephonyoperations for a majority of our revenue and profits.  The addition of our retail U.S. wirelessbusiness following the Alltel Acquisition on April 26, 2010 has shiftedour reliance substantially to our U.S. Wireless segment, which now includesboth our wholesale and retail U.S. wireless businesses.  For the three months ended September 30,2010, approximately 83% of our consolidated revenue was generated by our U.S.Wireless segment, while only 11% was generated by our International IntegratedTelephony segment.  In comparison, forthe three months ended September 30, 2009, approximately 48% of ourconsolidated revenue was generated by our U.S. Wireless segment (then our “RuralWireless” segment), while 34% was generated by our International IntegratedTelephony segment.

 

Asof September 30, 2010, our U.S. retail wireless services were offered insix states to approximately 767,000 customers under the “Alltel” brandname.  Our wireless licenses providemobile data and voice coverage to a network footprint covering a population ofapproximately six million people as of September 30, 2010.  Through the Alltel Acquisition, we acquired aregional, non-contiguous wireless network that we anticipate will requirenetwork expansion and improvements as well as roaming support to ensure ongoingnationwide coverage.  Our Alltel serviceofferings provide rate plans, advanced devices and features that include localand nationwide voice and data services on either a postpaid or prepaidbasis.  We offer several rate plansdesigned for customers to choose the flexibility that they desire for theircalling preferences, and believe that the ability to offer nationwide callingto our customers is a key factor in our ability to remain competitive in thetelecommunications market.

 

Therevenue of our U.S. retail wireless business is primarily driven by the numberof wireless retail subscribers, their adoption of our enhanced service offeringsand their related voice and data usage. The number of our retail subscribers and their usage volumes andpatterns also has a major impact on the profitability of our U.S. retailwireless operations.  Our customeractivity may be influenced by traditional retail selling periods, which may beseasonal in nature, and other factors that arise in connection with our ruralcustomer base.  We are currently in atransition period as we move from the legacy Alltel information technologysystems and platforms to our own.  Duringthis transition period, which we expect to continue into mid-2011, weanticipate that our U.S. retail wireless revenue will decline as our ability todrive subscriber additions, control churn and optimize our offerings isconstrained. .  During this time, we alsoexpect to experience higher economic-related churn as we eliminate certainsales and credit practices implemented by the management of the trust thatoperated the Alltel assets from 2009 through the completion of the AlltelAcquisition.  During this time, we mayengage in sales and promotional activities designed to retain or increase ourcustomer base, but may be affected by other factors, including general economicconditions, the roaming and usage of our existing customer base and actions byour competitors, which may reduce or outweigh the success of our marketing orpromotional efforts.  Once thistransition period expires, we expect that our churn will gradually improve aswe are able to refine our service offerings. The mix of our customers and theirpatterns of usage, particularly usage outside our network footprint, will havea significant impact on the level of profits for our U.S. retail wirelessbusiness.  In general, we compete withnational and regional wireless providers that offer both prepaid and postpaidservices, whose scale, resources and U.S. network footprint are generally significantlygreater than ours.  Our ability to remaincompetitive and to maintain reasonable profit margins will depend, in part, onour ability to provide competitive pricing for our customers, to provide thelatest mobile voice and data services in all of the areas where they wish toaccess those services and to anticipate and respond to various competitivefactors.

 

Inaddition, the revenue and profits of our U.S. wholesale wireless businesscontribute to our overall U.S. Wireless revenue and are primarily driven by thenumber of sites and base stations we operate, the amount of voice and datatraffic that each of these

 

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sitesgenerates, and the rate we get paid from our carrier customers on that traffic.We also provide roaming services in a number of areas in the U.S. (mainly inthe western United States) where we do not also operate a retail wirelessbusiness.  As a result of the AlltelAcquisition, our reported wholesale wireless revenue also includes roamingrevenue generation in areas in which we have retail wireless operations.  Historically, the growth in same site voiceand data volumes and the number of operated sites has outpaced the decline indata rates.  However, during 2010, asignificant decrease in the data rates almost offset overall voice and datatraffic growth.  The growth of wholesalewireless revenue has historically been driven mainly by the rate at which weexpand the number of base stations we operate. We compete with other wirelessservice providers that operate networks in their markets and offer wholesaleroaming services as well.

 

However,the most significant competitive factor we face in our U.S. wholesale wirelessbusiness is the extent to which our carrier customers elect to build or acquiretheir own infrastructure (including networks that we built out pursuant tocertain roaming agreements) in a market in which they operate, reducing oreliminating their need for our services in those markets.  For example, the 2009 acquisition by VerizonWireless of Alltel Corporation and subsequent 2010 acquisition of certaindivested Alltel assets by AT&T will result in our wholesale customershaving their own infrastructure in certain markets where they are currentlyserved by us. This has already resulted in some loss, and is expected tocontinue to result in a significant loss, of wireless wholesale revenue andoperating income in future periods, which, if not offset by growth in otherwholesale revenue generated or other sources, could materially reduce ouroverall operating profits. While we are not able to forecast the extent of thisrevenue impact precisely, we expect that at the very least such loss may morethan offset any growth in U.S. wholesale wireless revenue during these periods.

 

Formore information regarding this segment, see the discussion of “U.S. Wireless”in Note 10 to our Consolidated Financial Statements included in thisReport.

 

**Acquisition of Alltel Assets**

 

OnApril 26, 2010, we completed our previously-announced acquisition ofwireless assets from Cellco Partnership d/b/a Verizon Wireless pursuant to thePurchase Agreement, dated June 9, 2009, by and between the Company andVerizon.  Pursuant to the Alltel Acquisition, Verizon contributed certainlicenses, network assets, tower and other leases and other assets and certainrelated liabilities to a wholly-owned subsidiary limited liability company,whose membership interests were acquired by AWCC, our wholly-ownedsubsidiary.  In connection with the acquisition, the Company and Verizonentered into roaming and transition services arrangements and we obtained therights to use the Alltel brand and related service marks for up to twenty eightyears in connection with the continuing operation of the acquired assets. The purchase price of the acquisition was $200 million, plus approximately $21million in connection with a customary net working capital adjustment.

 

**Stimulus Grants**

 

In 2009 and 2010, we filed several applications for stimulus funds madeavailable by the U.S. Government under provisions of the American Recovery andReinvestment Act of 2009 intended to stimulate the deployment of broadbandinfrastructure and services to rural, unserved and underserved areas.

 

In December 2009, we were named to receive a $39.7 millionfederal stimulus grant to fund our ION Upstate New York Rural BroadbandInitiative, which involves building ten new segments of fiber-optic,middle-mile broadband infrastructure, serving more than 70 rural communities inupstate New York and parts of Pennsylvania and Vermont. The new project isbeing undertaken through our public-private partnership with the Development Authorityof the North Country (“DANC”), a New York State public benefit corporation thatowns and operates 750 miles of fiber optic network and provides wholesaletelecommunications transport services to voice, video, data and wirelessservice providers.  The$39.7 million grant, awarded to us by the National Telecommunications andInformation Administration of the U.S. Department of Commerce (“NTIA”), underits Broadband Technology Opportunities Program, will be paid over the course ofthe three-year project period as expenses are incurred. An additional$9.9 million will be invested in the project by us and by DANC.  The funding and build of this new projectbegan in the third quarter of 2010.   Theresults of our U.S. fiber optic transport business are included in the our “U.S.Wireline” segment.

 

On March 25, 2010 the NTIA awarded the Navajo Tribal UtilityAuthority (“NTUA”) a $32.1 million federal stimulus grant. The grant, alongwith partial matching funds, will provide broadband infrastructure access tothe Navajo Nation across Arizona, New Mexico and Utah. As part of the project,we are proposing to partner with NTUA to provide last mile services through a4G LTE network to be constructed as a part of this project. Our proposedpartnership with NTUA will receive a portion of the total grant to build-outthe last mile infrastructure. This network will allow NTUA to supply both fixedand mobile customers with high-speed broadband access. The funding of thisproject is not scheduled to begin until 2011, once the necessary environmentalsite work is completed.  Accordingly, wedid not recognize any of the granted funds during the three or nine monthsended September 30, 2010.  Theresults of our wholesale U.S. wireless

 

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businessare included in our “U.S. Wireless” segment.

 

On July 7, 2010, in partnership with the VermontTelecommunications Authority (the “VTA”), we were awarded a $33.4 millionfederal stimulus grant by the NTIA.  Thegrant, along with partial matching funds to be contributed by us (through aVermont subsidiary) and the VTA, will be invested in fiber-optic middle milenetwork in Vermont to provide broadband and wireless services to communityschools, colleges, libraries and state-owned buildings in the area.  The funding of this project is not scheduledto occur until 2011, once the necessary environmental site work iscompleted.  Accordingly, we did notrecognize any of the granted funds during the three or nine months ended September 30,2010.  The results of our U.S. wirelinebusiness are included in the our “U.S. Wireline” segment.

 

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**Results of Operations**

 

***Three Months EndedSeptember 30, 2009 and 2010***

 
| ** **                                                                    | ** ** | **Three Months Ended  September 30,** | ** **   | **Amount of  Increase** | ** ** | **Percent  Increase** | ** ** |
|-------------------------------------------------------------------------------|------------|------------------------------------------------------|--------------|------------------------------|------------|-----------------------|------------|
| ** **                                                                    | ** ** | **2009**                                             | ** **   | **2010**                     | ** ** | **(Decrease)**        | ** ** | **(Decrease)** | ** ** |
| ** **                                                                    | ** ** | **(In thousands)**                              | ** **   |
| **REVENUE:**                                                                  |       |                                                 |         |                         |       |                  |       |   |   |
| US  Wireless:                                                                 |       |                                                 |         |                         |       |                  |       |   |   |
| Retail                                                                        |       | $                                                    |  — |                         | $          |  108,828         |       | $ |  108,828 |   | — | % |
| Wholesale                                                                     |       | 31,837                                               |         | 49,952                       |       | 18,115                |       | 56.9 |   |
| International  Wireless                                                       |       | 11,684                                               |         | 14,220                       |       | 2,536                 |       | 21.7 |   |
| Wireline                                                                      |       | 21,969                                               |         | 20,829                       |       | (1,140                | )          | (5.2 | ) |
| Equipment  and Other                                                          |       | 602                                                  |         | 11,131                       |       | 10,529                |       | 1749 |   |
| Total  revenue                                                                |       | 66,092                                               |         | 204,960                      |       | 138,868               |       | 210.1 |   |
| **OPERATING EXPENSES:**                                                       |       |                                                 |         |                         |       |                  |       |   |   |
| Termination  and access fees                                                  |       | 11,830                                               |         | 53,076                       |       | 41,246                |       | 348.7 |   |
| Engineering  and operations                                                   |       | 6,519                                                |         | 21,747                       |       | 15,228                |       | 233.6 |   |
| Sales,  Marketing and customer services                                       |       | 3,454                                                |         | 50,411                       |       | 46,957                |       | 1359.5 |   |
| Equipment  Expense                                                            |       | 615                                                  |         | 12,700                       |       | 12,085                |       | 1965 |   |
| General  and administrative                                                   |       | 8,690                                                |         | 29,179                       |       | 20,489                |       | 235.8 |   |
| Acquisition-related  charges                                                  |       | 2,072                                                |         | 47                           |       | (2,025                | )          | (97.7 | ) |
| Depreciation  and amortization                                                |       | 9,763                                                |         | 23,974                       |       | 14,211                |       | 145.6 |   |
| Total  operating expenses                                                     |       | 42,943                                               |         | 191,134                      |       | 148,191               |       | 345.1 |   |
| Income  from operations                                                       |       | 23,149                                               |         | 13,826                       |       | (9,323                | )          | (40.3 | ) |
| **OTHER INCOME (EXPENSE):**                                                   |       |                                                 |         |                         |       |                  |       |   |   |
| Interest  expense                                                             |       | (1,228                                               | )            | (3,202                       | )          | (1,974                | )          | 160.7 |   |
| Interest  income                                                              |       | 354                                                  |         | 90                           |       | (264                  | )          | (74.6 | ) |
| Equity  in earnings of unconsolidated affiliate                               |       | —                                               |         | 166                          |       | 166                   |       | — |   |
| Other  income (expense), net                                                  |       | 13                                                   |         | 204                          |       | 191                   |       | 1469.2 |   |
| Other  income, net                                                            |       | (861                                                 | )            | (2,742                       | )          | (1,881                | )          | 218.5 |   |
| **INCOME BEFORE INCOME TAXES**                                                |       | 22,288                                               |         | 11,084                       |       | (11,204               | )          | (50.3 | ) |
| Income  taxes                                                                 |       | 9,919                                                |         | 5,022                        |       | (4,897                | )          | (49.4 | ) |
| **NET INCOME**                                                                |       | 12,369                                               |         | 6,062                        |       | (6,307                | )          | (51 | ) |
| Net  income attributable to non-controlling interests                         |       | (433                                                 | )            | 303                          |       | 736                   |       | 170 |   |
| **NET INCOME ATTRIBUTABLE TO ATLANTIC TELE-NETWORK, INC.  STOCKHOLDERS** |       | $                                                    | 11,936       |                         | $          |  6,365           |       | $ |  (5,571 | ) | (46.7 | )% |

 

*U.S. Wireless revenue.*  U.S. Wireless revenue includes voice and dataservices revenue from our prepaid and postpaid retail operations as well as ourwholesale roaming operations.  Retailrevenue is derived from access by our retail customers to and usage of ournetworks and facilities, including airtime, roaming and long distance as wellas enhanced services such as caller identification, call waiting, voice mailand other features. Wholesale revenue is generated from providing mobile voiceor data services to the customers of other wireless carriers and also includesrevenue from other, related, wholesale services such as the provision ofnetwork switching services and certain wholesale transport services.

 

The retail portion of our U.S. Wireless revenue was $108.8 million forthe three months ended September 30, 2010 all of which is attributable torevenue generated by assets we acquired in the Alltel Acquisition. Our U.S.Wireless post-paid subscriber base was approximately 550,000 and our prepaidsubscriber base was approximately 217,000 at September 30, 2010.

 

 We are currently in a transition period as wemove from the legacy Alltel information technology systems and platforms to ourown.  During this transition period, whichwe expect to continue into mid-2011, we anticipate that our U.S. retailwireless revenue may decline as our ability to drive subscriber additions,control churn and optimize our offerings is constrained.

 

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The wholesale portion of our U.S. Wireless revenue increased to $50.0million for the three months ended September 30, 2010 from$31.8 million for the three months ended September 30, 2009, anincrease of $18.2 million. The increase in wireless wholesale revenue was dueto the $20.9 million of roaming revenue generated by the networks we acquiredin the Alltel Acquisition offset by a $2.7 million decrease in revenues fromour legacy U.S. roaming network. Such decrease from our legacy U.S. roamingnetwork was due to the scheduled decrease in rates which more than offset theincrease in base stations from 564 as of September 30, 2009 to 601 as ofSeptember 30, 2010.

 

Verizon’s acquisition of Alltel in 2009 has caused some loss ofwireless wholesale revenue and contributed to our lack of growth this quarteras certain network assets acquired by Verizon overlap geographically with areasof our legacy U.S. roaming network where we previously provided wholesaleroaming services to Verizon.  Similarly,we expect that the AT&T acquisition of certain Alltel assets, which wascompleted in June 2010, will contribute to additional and larger decreasesin wireless wholesale revenue, as early as the fourth quarter of 2010, whenAT&T completes its previously announced UMTS network build in those areasoverlapping our network in the southwestern United States.  This loss in wireless wholesale revenue couldhave a significant negative impact on our operating income if it is not offsetor replaced by increased operating income from other sources.

 

While we expect to see some increase in wireless wholesale revenue fromour U.S. wireless business in geographical areas not impacted by Verizon orAT&T’s acquisition of Alltel networks, the pace of that increase innon-Alltel overlap markets is currently expected to be slower as compared tothe growth in previous periods due to a reduction in the number of new sitesand base stations added and recent reductions in roaming rates.  Additional rate reductions, under previouslycontracted agreements, may affect our revenue growth in upcoming quarters.  We also expect to receive a portion of the$32.1 million grant from the NTIA to build on the Navajo Nation during2011 through our proposed partnership with NTUA.

 

*International Wireless revenue.*  International Wireless revenue includesretail and wholesale voice and data wireless revenue from internationaloperations in Bermuda and the Caribbean.

 

International Wireless revenue increased by $2.5 million to$14.2 million for the three months ended September 30, 2010, from$11.7 million for the three months ended September 30, 2009.  This increase was primarily generated by theassets of our recent acquisition in Aruba and increased minutes of use inGuyana. Wireless subscribers in Guyana increased 6%, from approximately 277,000subscribers as of September 30, 2009 to approximately 293,000 subscribersas of September 30, 2010.

 

Whilewe have experienced recent subscriber growth in Guyana, competition remainsstrong, and the largely pre-paid subscriber base means that subscribers andrevenue could shift relatively quickly in future periods. In addition, theoverall number of our wireless subscribers in Guyana could be reduced as aresult of recent regulations imposed on Guyana telecommunications carriers,including our Guyana operations, to collect proof of address and photographicidentification for all new and existing customers.

 

*Wireline revenue.*  Wireline revenue is generated by our wirelineoperations in Guyana, including international telephone calls into and out ofGuyana, our integrated voice and data operations in New England and ourwholesale transport operations in New York State and in the western UnitedStates. This revenue includes basic service fees, measured service revenue, andinternet access fees, as well as installation charges for new lines, monthlyline rental charges, long distance or toll charges, maintenance and equipmentsales.

 

Wireline revenue decreased by $1.2 million to $20.8 million forthe three months ended September 30, 2010 from $22.0 million for thethree months ended September 30, 2009. A $1.7 million decrease ininternational long distance revenue was partially offset by an increase in U.S.revenue growth and growth generated by the July 2010 launch of our new fiberoptic submarine cable in Guyana. Our access lines in Guyana grew fromapproximately 144,000 lines as of September 30, 2009 to approximately149,000 lines as of September 30, 2010, an increase of 3%. Revenue fromthe growth in access lines has been partially offset by a decrease in usage ofthose lines that is likely due to wireless service alternatives.

 

We believe this decrease in international long distance revenue was aresult of continued and considerable illegal bypass activities resulting inlost revenue opportunities, as well as an overall reduction in call volume intoGuyana attributable to the current difficult global economic environment.  In the U.S., we saw increased revenue fromour upstate New York network transport service business. We continue to addbusiness customers in the U.S. for our voice and data services; however, theoverall revenue increase is partially offset by the decline in the residentialdata business, particularly dial-up internet services.

 

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In future periods, we anticipate that wireline revenue from ourinternational long distance business in Guyana may continue to decrease, butmay be offset by increased revenue from local telephone and voice services inGuyana, as well as high-speed data sales in New York. We are in the process ofexpanding our network in New York and began receiving a portion of the$39.7 million stimulus grant during the third quarter of 2010.  We do not expect the network buildout to becompleted during 2010 and, as such, do not expect any impact to our revenuesuntil 2011.

 

*Equipment and Other revenue.*  Equipment revenue represents revenue fromwireless equipment sales and other miscellaneous revenue items.

 

Equipment and Other revenue increased by $10.5 million to$11.1 million for the three months ended September 30, 2010, from$0.6 million for the three months ended September 30, 2009. The increaseis due to equipment sales from our Alltel Acquisition.  We anticipate that equipment revenue willremain fairly consistent in future periods as a percentage of our U.S. retailwireless revenues.

 

*Termination and access fee expenses*.  Termination and access fee expenses arecharges that we pay for voice and data transport circuits (in particular, thecircuits between our wireless sites and our switches), internet capacity andother access fees we pay to terminate our calls as well as bad debt expense.  Termination and access fees increased by$41.3 million from $11.8 million for the three months endedSeptember 30, 2009 to $53.1 million for the three months endedSeptember 30, 2010. The Alltel Acquisition resulted in $39.0 million ofthe increase.  The remaining increase wasdue to the expansion of our legacy U.S. roaming network and internationalnetworks.

 

Termination and access fees are expected to increase in future periods,but remain fairly proportionate to their related revenue as our networks expand.

 

*Engineering and operations expenses.*  Engineering and operations expenses includethe expenses associated with developing, operating, supporting and expandingour networks, including the salaries and benefits paid to employees directlyinvolved in the development and operation of our networks.  Engineering and operations expenses increasedby $15.2 million from $6.5 million for the three months endedSeptember 30, 2009 to $21.7 million for the three months endedSeptember 30, 2010 as a result of the Alltel Acquisition.  We expect that engineering and operationsexpenses will increase in the future as our networks expand and requireadditional support and as we continue to transition the network that weacquired as part of the Alltel Acquisition to our network.

 

*Sales marketing and customer service expenses.*  Sales and marketing expenses include salariesand benefits we pay to sales personnel, customer service expenses, salescommissions and the costs associated with the development and implementation ofour promotion and marketing campaigns.

 

Sales and marketing expenses increased by $46.9 million from$3.5 million for the three months ended September 30, 2009 to$50.4 million for the three months ended September 30, 2010. Themajority of this increase is the result of the Alltel Acquisition.  Sales and marketing expenses wereparticularly high in our U.S. wireless business as we incurred additionalexpenses primarily related to an accelerated pace of customer contract renewalsand extensions.

 

We expect that sales and marketing expenses will increase in the shortterm as we continue to incur higher than normal customer transition andretention costs.

 

*Equipment expenses.*  Equipment expenses include the costs of ourhandset and customer resale equipment at our retail wireless businesses.

 

Equipment Expenses increased from $0.6 million for the three monthsended September 30, 2009 to $12.7 million for the three months endedSeptember 30, 2010 as a result of the Alltel Acquisition. We expect thatthese expenses will increase in future periods in line with our expandedoperations but remain roughly proportionate to our equipment revenue.

 

*General and administrative expenses.*  General and administrative expenses includesalaries, benefits and related costs for general corporate functions, includingexecutive management, finance and administration, legal and regulatory,facilities, information technology and human resources.  General and administrative expenses alsoinclude internal costs associated with our performance of due-diligence on ourpending or completed acquisitions.

 

General and administrative expenses increased by $20.5 million from$8.7 million for the three months ended September 30, 2009 to $29.2million for the three months ended September 30, 2010.  We are currently in a transition period as weintegrate the new Alltel business. During this transition period, which we expect to continue intomid-2011, we anticipate that we will incur higher than usual general andadministrative expenses as certain significant costs continue to overlap withour already existing infrastructure. Once this transition period concludes, we expect that general andadministrative expenses, as a percentage of revenue, will decrease as we growour U.S. retail wireless business.

 

*Acquisition-related charges.*  Acquisition-related charges include theexternal costs, such as legal, accounting, and consulting fees directlyassociated with acquisition related activities, which are expensed as incurred.Acquisition-related charges do not include internal costs,

 

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suchas employee salary and travel-related expenses, incurred in connection with theAlltel Acquisition.

 

For the three months ended September 30, 2009, acquisition-relatedcharges for legal, banking, consulting and accounting fees in connection withthe Alltel Acquisition were $2.1 million.  Minimalacquisition-related charges were incurred during the three months endedSeptember 30, 2010.  We expect thatacquisition-related expenses will continue to be incurred from time to time asthe Company continues to explore any additional acquisition opportunities thatarise and may meet our investment objectives.

 

*Depreciation and amortization expenses.*  Depreciation and amortization expensesrepresent the depreciation and amortization charges we record on our propertyand equipment and on certain intangible assets.

 

Depreciation and amortization expenses increased by $14.2 millionfrom $9.8 million for the three months ended September 30, 2009 to$24.0 million for the three months ended September 30, 2010. Theincrease is primarily due to the addition of the Alltel tangible and intangibleassets as well as additional fixed assets from our network expansion in ourU.S. Wireless business.

 

We expect depreciation expense on our tangible assets to continue toincrease as a result of a future network expansion in the U.S. and elsewhere.  Such increase, however, will be partiallyoffset by a future decrease in the amortization of our intangible assets whichare being amortized using an accelerated amortization method.

 

*Interest expense.*  Interest expense represents interest incurredon our outstanding credit facilities including our interest rate swaps.

 

Interest expense increased from $1.2 million for the three monthsended September 30, 2009 to $3.2 million for the three months endedSeptember 30, 2010, due to the amendment of our prior credit agreement,which increased both our outstanding debt and applicable interest rates on suchdebt. On September 30, 2010, the Company entered into its Amended 2010 CreditFacility, further increasing the amounts available for borrowing.  As of September 30, 2010, we had $71.1million outstanding under our Amended 2010 Term Loan A facility, $146.3 millionoutstanding under our Amended 2010 Term Loan B facility, and $50.0 millionoutstanding under our 2010 Term Loan C facility.  We had no outstanding borrowings under ourAmended 2010 Revolver Loan as of September 30, 2010.  For a discussion of the Company’s 2010 CreditFacility and Amended 2010 Credit Facility, see Note 6 to the ConsolidatedFinancial Statements included in this Report and “—Liquidity and CapitalResources.”

 

*Interest income.*  Interest income represents interest earned onour cash and cash equivalents.

 

Interest income decreased to $0.1 million from $0.4 millionfor the three months ended September 30, 2010 and 2009, respectively. Thisdecrease is a result of a decrease in our cash balances as well as the interestrates and subsequent amounts earned on our cash and investments.

 

*Equity in earnings of unconsolidated affiliates. *    Equityin earnings of unconsolidated affiliates included our share of the earnings ofan unconsolidated affiliate of our U.S. Wireless segment. Equity in earnings ofunconsolidated affiliates was $0.2 million for the three months endedSeptember 30, 2010.

 

*Other income (expense). *Other income (expense)represents miscellaneous non-operational income we earned or expenses weincurred. Other income was $0.2 million for the three months endedSeptember 30, 2010.

 

*Income taxes*.  Income taxexpense includes federal and state income taxes at their respective statutoryrates as well as foreign income taxes in excess of the statutory U.S. incometax rates. Since we operate in jurisdictions that have a wide range ofstatutory tax rates, our consolidated effective tax rate is impacted by the mixof income generated in those jurisdictions as well as the receipt of dividendsfrom our foreign subsidiaries. Our effective tax rate was 45% for the threemonths ended September 30, 2009.  For thethree months ended September 30, 2010, our effective tax rate was 45%.  The tax expense for the three months endedSeptember 30, 2010 included an adjustment of $xx to reconcile estimates made inour 2009 tax provision to the actual amounts upon filing our 2009 tax returns.  Without this adjustment, our effective taxrate for the three months ended September 30, 2010 was 53%.

 

*Net Income Attributable to Non-Controlling Interests.*   Net income attributable to non-controllinginterests includes minority shareholders’ share of net income in our less thanwholly owned subsidiaries.

 

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Net income attributable to non-controlling interests decreased from anexpense of $0.4 million for the three months ended September 30, 2009 toincome of $0.3 million for the three months ended September 30, 2010. Thisdecrease was a result of the allocation of non-controlling shareholders’ shareof losses at our early stage businesses.

 

*Net income attributable to AtlanticTele-Network, Inc. Stockholders.*  As a result of the above factors, net incomedecreased to $6.4 million for the three months ended September 30, 2010from $11.9 million for the three months ended September 30, 2009. On a pershare basis, net income decreased from $0.78 per basic and diluted share to$0.41 per basic and diluted share for the three months ended September 30,2009 to 2010, respectively.

 

*Segment results.*  We currently have four material operatingsegments, which we manage and evaluate separately: (1) U.S. Wireless;(2) International Integrated Telephony; (3) Island Wireless; and(4) U.S. Wireline. Segment results are set forth in Note 10 to theConsolidated Financial Statements included in this Report.

 

***Nine Months Ended September 30,2009 and 2010***

 
| ** **                                                                    | ** ** | **Nine Months Ended  September 30,** | ** ** | **Amount of  Increase** | ** ** | **Percent  Increase** | ** ** |
|-------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|------------------------------|------------|-----------------------|------------|
| ** **                                                                    | ** ** | **2009**                                            | ** ** | **2010**                     | ** ** | **(Decrease)**        | ** ** | **(Decrease)** | ** ** |
| ** **                                                                    | ** ** | **(In thousands)**                             | ** ** |
| **REVENUE:**                                                                  |       |                                                |       |                         |       |                  |       |   |   |
| US  Wireless:                                                                 |       |                                                |       |                         |       |                  |       |   |   |
| Retail                                                                        |       | $                                                   | —     |                         | $          | 190,331               |       | $ | 190,331 |   | — | % |
| Wholesale                                                                     |       | 79,276                                              |       | 112,437                      |       | 33,161                |       | 41.8 |   |
| International  Wireless                                                       |       | 33,725                                              |       | 37,712                       |       | 3,987                 |       | 11.8 |   |
| Wireline                                                                      |       | 66,634                                              |       | 64,580                       |       | (2,054                | )          | (3.1 | ) |
| Equipment  and Other                                                          |       | 2,982                                               |       | 19,420                       |       | 16,438                |       | 551.2 |   |
| Total  revenue                                                                |       | 182,617                                             |       | 424,480                      |       | 241,863               |       | 132.4 |   |
| **OPERATING EXPENSES:**                                                       |       |                                                |       |                         |       |                  |       |   |   |
| Termination  and access fees                                                  |       | 34,702                                              |       | 109,186                      |       | 74,484                |       | 214.6 |   |
| Engineering  and operations                                                   |       | 21,010                                              |       | 46,288                       |       | 25,278                |       | 120.3 |   |
| Sales,  Marketing and Customer Services                                       |       | 9,769                                               |       | 86,310                       |       | 76,541                |       | 783.5 |   |
| Equipment  Expense                                                            |       | 1,697                                               |       | 22,321                       |       | 20,624                |       | 1,215.3 |   |
| General  and administrative                                                   |       | 26,166                                              |       | 62,887                       |       | 36,721                |       | 140.3 |   |
| Acquisition-related  charges                                                  |       | 2,479                                               |       | 15,881                       |       | 13,402                |       | 540.6 |   |
| Depreciation  and amortization                                                |       | 28,756                                              |       | 52,585                       |       | 23,829                |       | 82.9 |   |
| Total  operating expenses                                                     |       | 124,579                                             |       | 395,458                      |       | 270,879               |       | 217.4 |   |
| Income  from operations                                                       |       | 58,038                                              |       | 29,022                       |       | (29,016               | )          | (50 | ) |
| **OTHER INCOME (EXPENSE):**                                                   |       |                                                |       |                         |       |                  |       |   |   |
| Interest  expense                                                             |       | (3,582                                              | )          | (6,857                       | )          | (3,275                | )          | 91.4 |   |
| Interest  income                                                              |       | 1,063                                               |       | 329                          |       | (734                  | )          | (69 | ) |
| Gain  on acquisition, net of tax                                              |       | —                                              |       | 27,024                       |       | 27,024                |       | — |   |
| Equity  in earnings of unconsolidated affiliate                               |       | —                                              |       | 456                          |       | 456                   |       | — |   |
| Other  income (expense), net                                                  |       | 48                                                  |       | 435                          |       | 387                   |       | 806.3 |   |
| Other  income, net                                                            |       | (2,471                                              | )          | 21,387                       |       | 23,858                |       | 965.5 |   |
| **INCOME BEFORE INCOME TAXES**                                                |       | 55,567                                              |       | 50,409                       |       | (5,158                | )          | (9.3 | ) |
| Income  taxes                                                                 |       | 24,217                                              |       | 15,447                       |       | (8,770                | )          | (36.2 | ) |
| **NET INCOME**                                                                |       | 31,350                                              |       | 34,962                       |       | 3,612                 |       | 11.5 |   |
| Net  income attributable to non-controlling interests                         |       | (976                                                | )          | 212                          |       | 1,188                 |       | 121.7 |   |
| **NET INCOME ATTRIBUTABLE TO ATLANTIC TELE-NETWORK, INC.  STOCKHOLDERS** |       | $                                                   | 30,374     |                         | $          | 35,174                |       | $ | 4,800 |   | 15.8 | % |

 

*U.S. Wireless revenue.*  The retail portion of our U.S. Wirelessrevenue was $190.3 million for the nine months ended September 30, 2010all of which was generated by the assets we acquired in our Alltel Acquisition.Our U.S. Wireless post-paid subscriber base was approximately 550,000, andprepaid subscribers were approximately 217,000 at September 30, 2010.

 

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The wholesale portion of our U.S. Wireless revenue increased to $112.4million for the nine months ended September 30, 2010 from$79.3 million for the nine months ended September 30, 2009, anincrease of $33.1 million. The increase in wireless wholesale revenue was dueto the $34.7 million of roaming revenue generated by the networks we acquiredin the Alltel Acquisition partially offset by a $1.6 million decrease inrevenues from our legacy U.S. roaming network. Such decrease from our legacyU.S. roaming network was due to the overall decrease in roaming rates,partially offset by the increase in base stations from 564 as of September 30,2009 to 601 as of September 30, 2010.

 

*International Wireless revenue.*  International Wireless revenue increased by$4.0 million to $37.7 million for the nine months ended September 30,2010, from $33.7 million for the nine months ended September 30,2009.  This increase was primarilygenerated by the assets of our recent acquisition in Aruba and increasedminutes of use in Guyana. Wireless subscribers in Guyana increased 6%, fromapproximately 277,000 subscribers as of September 30, 2009 toapproximately 293,000 subscribers as of September 30, 2010.

 

*Wireline revenue.*  Wireline revenue decreased by $2.0 million to$64.6 million for the nine months ended September 30, 2010 from$66.6 million for the nine months ended September 30, 2009. Adecrease in international long distance revenue was partially offset by anincrease in U.S. revenue growth and growth generated by the July 2010 launch ofour new fiber optic submarine cable in Guyana. Our access lines in Guyana grewfrom approximately 144,000 lines as of September 30, 2009 to approximately149,000 lines as of September 30, 2010, an increase of 3%. Revenue fromthe growth in access lines has been partially offset by a decrease in usage ofthose lines that is likely due to wireless service alternatives.

 

*Equipment and Other revenue.*  Equipment and other revenue increased by$16.4 million to $19.4 million for the nine months endedSeptember 30, 2010, from $3.0 million for the nine months endedSeptember 30, 2009. The increase is due to equipment sales from ourrecently acquired U.S. retail wireless operations, partially offset by adecrease in revenues from our television business in the U.S. Virgin Islands,which we terminated in May of 2009.

 

*Termination and access fee expenses*.  Termination and access fees increased by$74.5 million from $34.7 million for the nine months endedSeptember 30, 2009 to $109.2 million for the nine months endedSeptember 30, 2010. The Alltel Acquisition resulted in $69.0 million ofthe increase.  The expansion of ourlegacy U.S. roaming network and international networks accounted for $2.0million and $3.5 million of the increase, respectively.

 

*Engineering and operations expenses.*    Engineering and operations expensesincreased by $25.3 million from $21.0 million for the nine months endedSeptember 30, 2009 to $46.3 million for the nine months endedSeptember 30, 2010 as a result of the Alltel Acquisition.

 

*Sales marketing and customer service expenses.*  Sales and marketing expenses increased by$76.5 million from $9.8 million for the nine months endedSeptember 30, 2009 to $86.3 million for the nine months endedSeptember 30, 2010.  Substantiallyall of this increase is the result of Alltel Acquisition.

 

*Equipment expenses.*  Equipment Expenses increased from $1.7million for the nine months ended September 30, 2009 to $22.3 million forthe nine months ended September 30, 2010 as a result of the AlltelAcquisition.

 

*General and administrative expenses.*  General and administrative expenses increasedby $36.7 million, or 140%, from $26.2 million for the nine months endedSeptember 30, 2009 to $62.9 million for the nine months endedSeptember 30, 2010. This increase resulted from the Alltel Acquisitionaswell as increased overhead to support our growth and internal costs associatedwith the Alltel Acquisition.

 

*Acquisition-related charges.*  For the nine months ended September 30,2010, acquisition-related charges for legal, banking, consulting and accountingfees were $15.9 million (including, in part, invoiced amounts disputed butnot yet resolved by the Company), substantially all of which were attributableto closing the Alltel Acquisition, as compared to $2.5 million for the ninemonths ended September 30, 2009.

 

*Depreciation and amortization expenses.*  Depreciation and amortization expensesincreased by $23.8 million, or 83%, from $28.8 million for the ninemonths ended September 30, 2009 to $52.6 million for the nine monthsended September 30, 2010. The increase is primarily due to the addition ofthe Alltel tangible and intangible assets as well as additional fixed assetsfrom our network expansion in our U.S. Wireless business.

 

*Interest expense.*  Interest expense increased from$3.6 million for the nine months ended September 30, 2009 to $6.9million for the nine months ended September 30, 2010, due to the amendmentof our prior Credit Agreement, which increased both our outstanding debt andapplicable interest rates on such debt.  On September 30, 2010, the Companyentered into its Amended 2010 Credit Facility, further increasing the amountsavailable for borrowing.  As ofSeptember 30, 2010, we had $71.1 million outstanding under our Amended2010 Term Loan A facility, $146.3 million outstanding under our Amended 2010Term Loan B facility, and $50.0 million outstanding under our 2010 Term Loan Cfacility.  We had no outstandingborrowings under our Amended 2010 Revolver Loan as of September 30, 2010.  For a discussion of the Company’s 2010 CreditFacility and Amended 2010 Credit Facility, see Note 6 to the ConsolidatedFinancial Statements included in this Report and “—Liquidity and CapitalResources.”

 

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*Interest income.*  Interest income decreased to$0.3 million from $1.1 million for the nine months endedSeptember 30, 2010 and 2009, respectively. This decrease is a result of adecrease in our cash balances as well as in the interest rates and subsequentamounts earned on our cash and investments.

 

*Gain on acquisition, net of tax. *Gain onacquisition, net of tax, represents the gain the Company recognized on theAlltel Acquisition. This gain was a result of a bargain purchase generated bythe forced divesture of the assets that was required to be completed by Verizonwithin a registered timeframe to a limited class of potential buyers.

 

*Equity in earnings of unconsolidated affiliates. *  Equity in earnings of unconsolidated affiliates was $0.5 million for the ninemonths ended September 30, 2010.

 

*Other income (expense). * For the nine months endedSeptember 30, 2010, other income was $0.4 million.

 

*Income taxes.*  Oureffective tax rate was 44% for the nine months ended September 30, 2009and 31% for the nine months ended September 30, 2010.

 

For2010, the effective tax rate was reduced by the bargain purchase gain which isshown net of deferred tax on our statements of operations.  Partially offsetting this reduction was a$5.2 million expense related to an increase in valuation allowance against theCompany’s foreign tax credit carryforward. As part of the Alltel Acquisition, which was completed during the secondquarter of 2010, and the associated levels of future debt and interest service,the Company re-examined its projected mix of foreign source and US-sourceearnings and concluded it is more likely than not that it will not generateenough foreign source income to utilize its existing foreign tax credits priorto their expiration date.  As a result,the Company placed a full valuation allowance against those credits during thesecond quarter of 2010.

 

*Net Income Attributable to Non-Controlling Interests.*  Net income attributable to non-controlling interestsdecreased from a $1.0 million expense for the nine months endedSeptember 30, 2009 to a $0.2 million gain for the nine months endedSeptember 30, 2010. This decrease was a result of the allocation ofnon-controlling shareholders’ share of losses at our early stage businesses.

 

*Net income attributable to AtlanticTele-Network, Inc. Stockholders.*  As a result of the above factors, net incomeincreased to $35.2 million for the nine months ended September 30, 2010from $30.4 million for the nine months ended September 30, 2009. On a pershare basis, net income increased from $1.99 per basic and $1.98 per dilutedshare to $2.30 per basic and $2.27 per diluted share for the nine months endedSeptember 30, 2009 and 2010, respectively.

 

**Regulatoryand Tax Issues**

 

We are involved in a number of regulatory and tax proceedings. See Note11 to the Consolidated Financial Statements included in this Report. A materialand adverse outcome in one or more of these proceedings could have a materialadverse impact on our financial condition and future operations.

 

**Liquidityand Capital Resources**

 

Historically, we have met our operational liquidity needs through acombination of cash on hand and internally generated funds and have fundedcapital expenditures and acquisitions with a combination of internallygenerated funds, cash on hand and borrowings under our credit facilities.  We believe that our current cash, cashequivalents and availability under our current credit facility will besufficient to meet our cash needs for working capital and capital expendituresin the near term.

 

***Uses of Cash***

 

*Capital Expenditures.*  A significant use of our cash has been forcapital expenditures to expand and upgrade our networks.

 

For the nine months ended September 30, 2009 and 2010, we spentapproximately $40.3 million and $91.6 million on capital expenditures,respectively. Of the 2010 capital expenditures, we spent approximately $54.3million in our U.S. Wireless segment. Included in these costs are one-timecosts associated with developing our billing, point-of-sale and other operatingand business systems, and costs related to network migration following theAlltel closing, along with costs associated with expanding both our retail andwholesale networks. In our International Integrated Telephony segment, we spentapproximately $20.2 million on capital expenditures for the nine months ended September 30,2010, of which $13.7 million was related to construction costs on a new fiberoptic submarine cable into Guyana which we launched in July 2010, whilethe remainder of the capital expenditures in this segment was for the expansionof the capacity and coverage of our wireline and wireless network in Guyana. Inaddition, we invested $12.4 million in capital expenditures in our IslandWireless segment with $9.2 million related to two wireless network build-outsin the U.S. Virgin Islands, which we launched in August 2010. A majorityof the remaining Island Wireless capital expenditures was incurred in Turks andCaicos in connection with the development and expansion of our network which welaunched in June 2010.

 

We are continuing to invest in expanding our networks in many of ourmarkets and expect to incur capital expenditures between $130 million and $140million in 2010.  The majority of theseexpenditures relate to our U.S wireless business.  Specifically we anticipate expenditures ofbetween $85 million to $95 million in our U.S. retail wireless businessprimarily related to one-time costs for network migration and informationtechnology and system conversion costs in conjunction with our integration ofour newly acquired wireless assets. Capital expenditures in our U.S. retail wireless business are alsocomprised of several capital projects inherited with our Alltel Acquisitionthat we intend to complete during 2010.

 

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Weexpect to fund our current capital expenditures primarily from cash generatedfrom our operations, and borrowings under our credit facilities.

 

*Acquisitions and Investments.*  Historically, we have funded our acquisitionswith a combination of cash on hand and borrowings under our credit facilities.In April 2010, we funded the purchase price of the Alltel Acquisition withcash-on-hand and borrowings under our existing credit facility.  We drew down a $150 million term loan underthe credit facility and borrowed $40 million under our previously undrawn $75million revolving credit facility. On September 30, 2010, we amended our2010 Credit Facility and drew down a $50 million term loan,  repaid the outstanding balances on our 2010 RevolverLoan and also expanded the revolving credit facility to $100 million.

 

We also continue to explore opportunities to acquire or expand ourexisting communications properties or licenses in the United States, theCaribbean and elsewhere.  Suchacquisitions may require external financing. While there can be no assurance asto whether, when or on what terms we will be able to acquire any suchbusinesses or licenses or make such investments, such acquisitions may beaccomplished through the issuance of shares of our capital stock, payment ofcash or incurrence of additional debt. From time to time, we may raise capital ahead of any definitive use ofproceeds to allow us to move more quickly and opportunistically if anattractive investment materializes.

 

*Dividends.*  We use cash-on-hand to make dividend paymentsto our common stockholders when declared by our Board of Directors. For thenine months ended September 30, 2010, our dividends to our stockholderswere approximately $9.5 million, which reflects dividends declared onApril 1, June 18, and September 27, 2010, and paid onApril 19, July 12, and October 12, 2010, respectively. We havepaid quarterly dividends for the last 48 fiscal quarters.

 

*Stock Repurchase Plan.*  Our Board of Directors approved a $5.0million stock buyback plan in September 2004 pursuant to which we havespent $2.1 million as of September 30, 2010 repurchasing common stock. Wemay repurchase shares at any time depending on market conditions, our availablecash and our cash needs. We did not repurchase any shares under this planduring the nine months ended September 30, 2010.

 

***Sources of Cash***

 

*Total Liquidity at September 30, 2010.*  As of September 30, 2010, we hadapproximately $61.8 million in cash and cash equivalents, a decrease of $28.4million from the December 31, 2009 balance of $90.2 million. The decreasein our cash and cash equivalents is attributable to the cash used in connectionwith the Alltel Acquisition.  Inaddition, we have $0.4 million in restricted cash escrowed for payment on theundersea cable in Guyana as of September 30, 2010.

 

*Cash Generated by Operations.*  Cash provided by operating activities was$100.3 million for the nine months ended September 30, 2010 compared to$70.8 million for the nine months ended September 30, 2009. The increaseof $29.5 million was primarily due to increased accrued liabilities as a resultof the Alltel Acquisition for the nine months ended September 30, 2010 ascompared to September 30, 2009.

 

*Cash Generated by Financing Activities.*On January 20, 2010, the Company amended and restated its 2008 CreditFacility with CoBank as Administrative Agent (the “2010 CoBank Credit Agreement”).  The 2010 CoBank Credit Agreement provided fora $298.9 million credit facility, consisting of i) a $73.9 millionterm loan (the “2010 Term Loan A”) which was the amount then outstanding underthe 2008 Term Loan, ii) a new $150.0 million term loan (the “2010 TermLoan B”), iii)  a $75.0 millionrevolver loan (the “2010 Revolver Loan”) and iv) one or more additional termloans up to an aggregate $50.0 million, subject to lender andadministrative agent approval (together with the 2010 Term Loan A, the 2010Term Loan B and the 2010 Revolver Loan, the “2010 Credit Facility”).  As discussed in Note 4, the Company partiallyfunded the purchase price of the Alltel Acquisition with the $150 million 2010Term Loan B and borrowed $40 million under the 2010 Revolver Loan.

 

OnSeptember 30, 2010, the Companyexpanded the 2010 Credit Facility by entering into a second amended and restated credit facility with CoBank as Administrative Agent (the “Amended 2010 CoBank Credit Agreement”).  The Amended 2010 CoBank Credit Agreement provides for a $370.2 million credit facility, consisting of i) a $72.0 million term loan (the “Amended 2010 Term Loan A”), ii) a $148.1 million term loan (the “Amended 2010 Term Loan B”), iii) a new $50.0 million term loan (the “2010Term Loan C”) and iv) an expanded$100.0 million revolver loan of which theCompany may use up to $10.0 million for standby or trade letters of credit andmay use up to $10 million under a swingline sub-facility (the “Amended 2010Revolver Loan,” and together with the Amended 2010 Term Loan A,Amended 2010 Term Loan B and 2010 TermLoan C, the “Amended 2010 Credit Facility”). The Amended 2010 Credit Facility also provides for one or more additional termloans up to an aggregate $50.0 million, subject to lender 

 

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and administrative agent approval.  The terms and conditions of the Amended 2010CoBank Credit Agreement, as described below, remained largely unchanged fromthe 2010 CoBank Credit Agreement.

 

Uponthe closing of the Amended 2010 Credit Facility, $72.0 million under theAmended 2010 Term Loan A and $148.1 million under the Amended 2010 Term Loan Bremained outstanding from the Company’s 2010 Credit Facility.  Also uponthe closing of the Amended 2010 Credit Facility, the Company drew down $50.0million under the 2010 Term Loan C, a portion of which was used to repayoutstanding borrowings under the Company’s existing 2010 Revolver Loan. The Company currently has no borrowings outstanding under the Amended 2010Revolver Loan.

 

The Amended 2010 Term Loan A, the Amended 2010Term Loan B and the 2010 Term Loan C eachmature on September 30, 2014, with certain quarterly repayment obligationsdescribed below, unless accelerated pursuant to an event of default, asdescribed below.  The Amended 2010Revolver Loan matures on September 10, 2014, unless accelerated pursuantto an event of default, as described below. Amounts borrowed under the Amended2010 Term Loan A, Amended 2010 Term Loan B, 2010 Term Loan C and the Amended2010 Revolver Loan bear interest at a rate equal to, at the Company’s option,either (i) the London Interbank Offered Rate (LIBOR) plus an applicablemargin ranging between 3.50% to 4.75% or (ii) a base rate plus anapplicable margin ranging from 2.50% to 3.75% (or, in the case of amountsborrowed under the swingline sub-facility to the Amended 2010 Revolver Loan, anapplicable margin ranging from 2.00% to 3.25%). The Company is not required to apply a minimum LIBOR percentage for anyloans bearing interest at the LIBOR rate. The base rate is equal to the higherof either (i) 1.50% plus the higher of (x) the one-week LIBOR and(y) the one-month LIBOR and (ii) the prime rate (as defined in thecredit agreement). The applicable margin is determined based on the ratio ofthe Company’s indebtedness (as defined in the credit agreement) to its EBITDA(as defined in the credit agreement). Borrowings as of September 30, 2010, including the interest rateswap agreement as described in Note 7, were bearing a weighted-averageinterest rate of 5.26%.

 

All amounts outstanding under the Amended 2010Revolver Loan will be due and payable on September 10, 2014 or the earlieracceleration of the loan upon an event of default.  Amounts outstanding under the Amended 2010Term Loan A and the Amended 2010 Term Loan B became due and payable commencingon September 30, 2010, in quarterly payments equal to 1.25% of the initialprincipal amount outstanding under each loan, increasing to 2.50% of theinitial principal amount outstanding commencing on March 31, 2012.  The 2010 Term Loan C will become due andpayable commencing on December 31, 2010, in quarterly payments equal to$250,000. Remaining balances will be due and payable upon the final maturitydate of September 30, 2014, unless the loans are earlier accelerated uponan event of default.  The Company mayprepay the Amended 2010 Credit Facility at any time without premium or penalty,other than customary fees for the breakage of any LIBOR loans.  Under the terms of the Amended 2010 CreditFacility, the Company must also pay a fee ranging from 0.50% to 0.75% of theaverage daily unused portion of the Amended 2010 Revolver Loan over eachcalendar quarter, which fee is payable in arrears on the last day of eachcalendar quarter.

 

Certain of our subsidiaries, including ourprincipal wholly-owned domestic operating subsidiaries, are guarantors of ourobligations under the Amended 2010 CoBank Credit Agreement. Further, ourobligations are secured by (i) a first priority, perfected lien onsubstantially all of our property and assets and that of the guarantorsubsidiaries, and (ii) a pledge of 100% of the Company’s equity interestsin certain domestic subsidiaries and up to 65% of the equity interestsoutstanding of certain foreign subsidiaries, in each case, including theCompany’s principal operating subsidiaries.

 

The Amended 2010 CoBank Credit Agreementcontains customary representations, warranties and covenants, includingcovenants by the Company limiting additional indebtedness, liens, guaranties,mergers and consolidations, substantial asset sales, investments and loans,sale and leasebacks, transactions with affiliates and fundamental changes. Inaddition, the Amended 2010 CoBank Credit Agreement contains financial covenantsby the Company that (i) impose a maximum ratio of indebtedness (as definedin the credit agreement) to EBITDA (as defined in the credit agreement),(ii) require a minimum ratio of EBITDA to cash interest expense,(iii) require a minimum ratio of equity to consolidated assets and(iv) require a minimum ratio of EBITDA to fixed charges (as defined in thecredit agreement). As of September 30, 2010, the Company was in compliancewith all of the financial covenants of the Amended 2010 CoBank CreditAgreement.

 

The Amended 2010 CoBank Agreement provides forevents of default customary for credit facilities of this type, including butnot limited to non-payment, defaults on other debt, misrepresentation, breachof covenants, representations and warranties, insolvency and bankruptcy. Afterthe occurrence of an event of default and for so long as it continues, theadministrative agent or the requisite lenders (as defined in the creditagreement) may increase the interest rate then in effect on all outstandingobligations by 2.0%. Upon an event of default relating to insolvency,bankruptcy or receivership, the amounts outstanding under the Amended 2010Credit Facility will become immediately due and payable and the lendercommitments will be automatically terminated. Upon the occurrence andcontinuation of any other event of default, the administrative agent and/or therequisite lenders (as defined in the credit agreement) may accelerate paymentof all obligations and terminate the lenders’ commitments under the Amended2010 CoBank Agreement.

 

Asof December 31, 2009 the Company’s sole derivative instrument was aninterest rate swap with an initial notional amount of $68 million that wasdesignated as a cash flow hedge of interest rate risk. On July 26, 2010,the Company executed an additional interest rate swap with an initial notionalamount of $30 million that was also designated as a cash flow hedge of interestrate risk bringing the total notional amount of cash flow hedges to $98 millionas of September 30, 2010.

 

***Factors Affecting Sources of Liquidity***

 

*Internally Generated Funds.*  The key factors affecting our internallygenerated funds are demand for our services, competition, regulatorydevelopments, economic conditions in the markets where we operate ourbusinesses and industry trends within the telecommunications industry. For adiscussion of tax and regulatory risks in Guyana that could have a materialadverse impact on our liquidity, see “Risk Factors—Risks Relating to OurWireless and Wireline Services in Guyana”, and “Business—Regulation of OurGT&T Subsidiary” in our 2009 Form 10-K and Note 11 to the CondensedConsolidated Financial Statements included in this Report.

 

*                RestrictionsUnder Credit Facility.*  TheAmended 2010 CoBank Credit Agreement contains customary representations,warranties and covenants, including covenants by us limiting additionalindebtedness, liens, guaranties, mergers and consolidations, substantial assetsales, investments and loans, sale and leasebacks, transactions with affiliatesand fundamental changes. In addition, the 2010 Credit Facility contains financialcovenants by us that (i) impose a maximum ratio of indebtedness (asdefined in the credit agreement) to EBITDA (as defined in the creditagreement), (ii) require a minimum ratio of EBITDA to cash interestexpense, (iii) require a minimum ratio of equity to consolidated assetsand (iv) require a minimum ratio of EBITDA to fixed charges (as defined inthe credit agreement). As of September 30, 2010, we were in compliancewith all of the financial covenants of the Amended 2010 CoBank Credit Agreement.

 

*Capital Markets.*  Our ability to raise funds in the capitalmarkets depends on, among other things, general economic conditions, theconditions of the telecommunications industry, our financial performance, thestate of the capital markets and our compliance with Securities and ExchangeCommission (“SEC”) requirements for the offering of securities. On May 13,2010, the SEC declared effective a new “universal” shelf registration statementfiled by the Company. This filing registered potential future offerings by theCompany of the Company’s securities.

 

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**Recent Accounting Pronouncements**

 

In January 2010, theFASB issued updated guidance to amend the disclosure requirements related torecurring and nonrecurring fair value measurements. This update requires newdisclosures on significant transfers of assets and liabilities in and out ofLevel 1 and Level 2 of the fair value hierarchy (including the reasons forthese transfers) and also requires a reconciliation of recurring Level 3measurements about purchases, sales, issuances and settlements on a grossbasis. In addition to these new disclosure requirements, this update clarifiescertain existing disclosure requirements. For example, this update clarifiesthat reporting entities are required to provide fair value measurementdisclosures for each class of assets and liabilities rather than each majorcategory of assets and liabilities. This update also clarifies the requirementfor entities to disclose information about both the valuation techniques andinputs used in estimating Level 2 and Level 3 fair value measurements. Thisupdate is effective for companies with interim and annual reporting periodsafter December 15, 2009, except for the requirement to provide the Level 3activity of purchases, sales, issuances, and settlements on a gross basis,which will become effective for interim and annual reporting periods beginningafter December 15, 2010. The Company adopted the updated guidance in thefirst quarter of 2010 and the adoption did not have an impact on the Company’sfinancial position, results of operations, or cash flows.  See Note 5 to the Condensed Consolidated FinancialStatements included in this Report for more information.

 

In June 2009, the FASBissued new authoritative guidance that amends certain guidance for determiningwhether an entity is a variable interest entity (VIE). The guidance requires anenterprise to perform an analysis to determine whether the Company’s variableinterests give it a controlling financial interest in a VIE. A company would berequired to assess whether it has an implicit financial responsibility toensure that a VIE operates as designed when determining whether it has thepower to direct the activities of the VIE that most significantly impact theentity’s economic performance. In addition, this guidance amends earlierguidance requiring ongoing reassessments of whether an enterprise is theprimary beneficiary of a VIE. The adoption of the provisions of this guidance,which was effective January 1, 2010, did not have a material impact on theconsolidated financial statements.

 

**ITEM3.  QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK**

 

*Foreign Currency Exchange Sensitivity.*  GT&T’s functional currency is the U.S.dollar because a significant portion of GT&T’s revenue and expenditures aretransacted in U.S. dollars. The results of future operations nevertheless maybe affected by changes in the value of the Guyana dollar; however, the Guyaneseexchange rate has remained at approximately $205 Guyana dollars to $1 U.S.dollar since 2004 so we have not recorded any foreign exchange gains or lossessince that date. All of our other foreign subsidiaries operate in jurisdictionswhere the U.S. dollar is the recognized currency.

 

*Interest Rate Sensitivity.*  Our exposure to changes in interest rates islimited and relates primarily to our variable interest rate long-term debt. Asof September 30, 2010, $98.0 million of our long term debt has a fixedrate by way of interest-rate swaps that effectively hedge our interest raterisk. The remaining $152.8 million of long term debt as of September 30,2010, was subject to interest rate risk. As a result, a 1% increase in thevariable borrowing rate associated with our variable rate debt would result inadditional annualized interest expense of $1.5 million. We continue to evaluateour exposure to interest rate risk, including additional hedging opportunities.If the company decides against any additional hedges, our exposure tofluctuations in interest rates could have a material impact on our financialstatements.

 

**ITEM 4.CONTROLS AND PROCEDURES**

 

Ourmanagement, with the participation of our Chief Executive Officer and ChiefFinancial Officer, evaluated the effectiveness of our disclosure controls andprocedures as of September 30, 2010. The term “disclosure controls and procedures,” as defined inRules 13a-15(e) and 15d-15(e) under the Securities Exchange Actof 1934, as amended (the “Exchange Act”), means controls and other proceduresof an issuer that are designed to ensure that information required to bedisclosed by the issuer in the reports that it files or submits under theExchange Act is recorded, processed, summarized and reported, within the timeperiods specified in the SEC’s rules and forms.  Disclosure controls and procedures include,without limitation, controls and procedures designed to ensure that informationrequired to be disclosed by an issuer in the reports that it files or submitsunder the Exchange Act is accumulated and communicated to the issuer’smanagement, including its principal executive and principal financial officers,as appropriate to allow timely decisions regarding required disclosure.  Management recognizes that any controls andprocedures, no matter how well designed and operated, can provide onlyreasonable assurance of achieving their objectives and management necessarilyapplies its judgment in evaluating the cost-benefit relationship of possiblecontrols and procedures.  Based on theevaluation of our disclosure controls and procedures as of September 30,2010, our Chief Executive Officer and Chief Financial Officer concluded that,as of such date, our disclosure controls and procedures were effective at thereasonable assurance level to ensure that information required to be disclosedby us in reports that we file or submit under the Exchange Act is recorded,processed, summarized and reported within the time periods specified inSecurities and Exchange Commission rules and forms and is accumulated andcommunicated to our management, including our Chief Executive Officer and ChiefFinancial Officer as appropriate to allow timely decisions regarding requireddisclosure.

 

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*Changes in internal control over financial reporting.*  Our management, with the participation of ourprincipal executive officer and principal financial officer, is responsible forestablishing and maintaining adequate internal control over financial reportingas defined in Rules 13a-15(f) and 15d-15(f) under the ExchangeAct, as amended.  ATN considers theAlltel Acquisition completed on April 26, 2010 as material to the resultsof its operations, financial position and cash flows from the date ofacquisition through September 30, 2010 and considers the internal controls andprocedures relating to the acquired Alltel operations to be reasonably likelyto materially affect the ATN’s internal control over financial reporting.  The Company plans to utilize the scope exemptionas it relates to the Alltel operations in management’s report on internalcontrol over financial reporting for the year-ended December 31, 2010.

 

**PART II—OTHERINFORMATION**

 

**Item 1. Legal Proceedings**

 

SeeNote 11 to the Condensed Consolidated Financial Statements included in thisReport.

 

**Item 1A. Risk Factors**

 

In addition to the otherinformation set forth in this Report, you should carefully consider the factorsdiscussed in Part I, “Item 1A. Risk Factors” in our 2009 Annual Report onForm 10-K as filed with the SEC on March 16, 2010, and Part II, “Item1A. Risk Factors” in our Quarterly Report on Form 10-Q, for the quarterlyperiod ended March 31, 2010, as filed with the SEC on April 10, 2010,which could materially affect our business, financial condition or futureresults. The risks described in our 2009 Form 10-K and first quarter 2010Form 10-Q are not the only risks facing our Company.  Additional risks and uncertainties notcurrently known to us or that we currently deem to be immaterial alsomay materially adversely affect our business, financial condition and/oroperating results.

 

**Item 2.  Unregistered Sales of Equity Securities and Use ofProceeds**

 

InSeptember 2004, the Board of Directors authorized the Company torepurchase up to $5.0 million of common stock. The repurchase authorizations donot have a fixed termination date and the timing of the buyback amounts andexact number of shares purchased will depend on market conditions.

 

Thefollowing table reflects the repurchases by the Company of its common stockduring the quarter ended September 30, 2010:

 
| **Period**                                            | ** ** | **(a)  Total Number  of Shares  Purchased** | ** ** | **(b)  Average  Price  Paid per  Share** | ** ** | **(c)  Total Number of  Shares Purchased  as Part of Publicly  Announced Plans  or Programs** | ** ** | **(d)  Maximum  Number (or  Approximate  Dollar Value) of  Shares that May  be Purchased  Under the Plans or  Programs** | ** ** |
|-------------------------------------------------------|------------|-------------------------------------------------------|------------|-----------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| July 1, 2010 — July 31, 2010           |       | —                                                |       | $                                             | —     |                                                                                                                                  | —     |                                                                                                                                                                  | $          | 2,808,173 |   |
| August 1, 2010 — August 31, 2010       |       | —                                                |       | $                                             | —     |                                                                                                                                  | —     |                                                                                                                                                                  | $          | 2,808,173 |   |
| September 1, 2010 — September 30, 2010 |       | —                                                |       | $                                             | —     |                                                                                                                                  | —     |                                                                                                                                                                  | $          | 2,808,173 |   |

 

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**Item 6. Exhibits**

 
| 10.1   |   | Offer Letter by and  between Atlantic Tele-Network, Inc. and Karl D. Noone, dated July 26, 2010  (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on  Form 8-K filed on August 11, 2010 (File No. 001-12593)).                                                                                                                                                                                                            |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.2   |   | Second Amended and  Restated Credit Agreement dated as of September 30, 2010 by and among  Atlantic Tele-Network, Inc., as Borrower, CoBank, ACB, as Administrative  Agent, Arranger, Swingline Lender, an Issuing Lender and a Lender, the  Guarantors named therein, and the other Lenders named therein (incorporated  by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K  filed on October 1, 2010 (File No. 001-12593)). |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 31.1   |   | Certification of Chief  Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act  of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of  2002.                                                                                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 31.2   |   | Certification of Chief  Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act  of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of  2002.                                                                                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 32.1   |   | Certification of Chief  Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 32.2   |   | Certification of Chief  Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                     |

 

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**SIGNATURES**

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 
|                         | Atlantic  Tele-Network, Inc.      |
|------------------------------|----------------------------------------|
|                         |                                   |
| Date:  November 9, 2010 | /s/  Michael T. Prior                  |
|                         | Michael  T. Prior                      |
|                         | President  and Chief Executive Officer |
|                         |                                   |
| Date:  November 9, 2010 | /s/  Justin D. Benincasa               |
|                         | Justin  D. Benincasa                   |
|                         | Chief  Financial Officer and Treasurer |

 

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**EXHIBIT INDEX**

 
| **Item  No.** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|---------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.1          |       | Offer Letter by and between Atlantic  Tele-Network, Inc. and Karl D. Noone, dated July 26, 2010 (incorporated  by reference to Exhibit 10.1 of the Company’s Current Report on  Form 8-K filed on August 11, 2010 (File No. 001-12593)).                                                                                                                                                                              |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.2          |       | Second  Amended and Restated Credit Agreement dated as of September 30, 2010 by and  among Atlantic Tele-Network, Inc., as Borrower, CoBank, ACB, as  Administrative Agent, Arranger, Swingline Lender, an Issuing Lender and a  Lender, the Guarantors named therein, and the other Lenders named therein  (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on  Form 8-K filed on October 1, 2010 (File No. 001-12593)). |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 31.1          |       | Certification  of Chief Executive Officer pursuant to Rule 13a-14(a) of the  Securities Exchange Act of 1934, as adopted pursuant to Section 302 of  the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                       |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 31.2          |       | Certification  of Chief Financial Officer pursuant to Rule 13a-14(a) of the  Securities Exchange Act of 1934, as adopted pursuant to Section 302 of  the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                       |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 32.1          |       | Certification  of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                            |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 32.2          |       | Certification  of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                            |

 

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